Axon Enterprise, Inc.: Form 10-K for the period ended Dec 31, 2025

Overview

Axon Enterprise, Inc. (“Axon,” the “Company,” “we” or “us”) is a technology company that provides integrated hardware and software solutions. Founder-led since 1993, Axon began with a mission to protect life and has grown into a global technology company serving a range of customers. Our products and services allow customers across the public and private sector to capture and use critical data to support fully-connected operational workflows. Our trusted network seamlessly integrates software and hardware with a range of connected devices, including TASER energy devices, cameras and sensors, drones and robotics, cloud-based evidence management, records management, real-time operations software, critical incident and emergency response systems, immersive training, and productivity tools – all enhanced by artificial intelligence (“AI”). Designed to work together, these solutions create a unified, data-driven operating system that prioritizes safety and helps protect people and places with greater speed, accuracy, transparency, and accountability.

Our integrated technology platform of hardware and software solutions advances our mission to (i) make the bullet obsolete, (ii) reduce social conflict, and (iii) enable a fair and effective justice system. Our products and technology solutions address complex, high-stakes challenges, and our mission attracts top talent. We aim to invent and deliver technology solutions that progressively make the right things easier and the wrong things harder every day.

Axon is a diversified technology company with employees distributed across multiple geographies. Alongside our primary corporate headquarters in Scottsdale, Arizona, we have hubs in many major cities across the United States and ongoing international expansion across Europe, Asia, and the Americas, as we continue to drive our mission globally.

Business Segments

During the year ended December 31, 2025, we realigned our business to better reflect our continued growth and expansion of our technology solutions. Previously reported within two reportable segments, TASER and Software and Sensors, we realigned our business in a manner that provides increased transparency and distinction between our software and services and hardware components.

Axon’s operations comprise a fully integrated suite of products across connected hardware, software, and services which are disclosed in two reportable segments:

1. Software and Services: We develop, manufacture and sell cloud-based Software-as-a-Service (“SaaS”) solutions that leverage AI and enable our customers to capture, securely store, manage, share and analyze video and other digital evidence. Our software offerings also support productivity and real-time operations. Our offerings include Axon Evidence, Draft One, Axon Records, Axon Standards, Axon Fusus, and Axon Assistant, among others. The Software and Services segment includes recurring cloud-hosted software revenue, related non-recurring professional services revenue, and revenue from certain software, including on-premise licenses.

2. Connected Devices: We develop, manufacture and sell fully integrated hardware solutions such as conducted energy devices (“CEDs”) sold under the TASER brand, body cameras, fixed and in-car cameras, drone and counter-drone technologies, and a broad ecosystem of accessories, extended warranties and related hardware products.

For further information about our reportable segments and sales by geographic region, refer to Note 1 of Part II, Item 8 of this Annual Report on Form 10-K.

Key Product Category Revenue Drivers: What We Offer

Axon’s products and services are designed to operate as an integrated ecosystem consisting of integrated connected hardware devices, cloud-hosted software applications and real-time operational tools. Our revenue is derived from a combination of hardware sales, multi-year recurring software subscriptions, professional services, and extended warranties. The following describes the principal product categories that drive revenue across our two reportable segments.

Software and Services

Axon has a suite of cloud-based, SaaS solutions that deeply integrate with our hardware to benefit customers and drive annual recurring revenue, which totaled $1.3 billion1 as of December 31, 2025. Revenue from our SaaS solutions is primarily driven from subscription licensing, premium offering adoptions, and ecosystem expansion. Our SaaS solutions can be best categorized into three categories:

• Digital Evidence Management: Axon Evidence is a secure, cloud-based platform that enables public safety to efficiently store, manage and share critical evidence while ensuring chain of custody and compliance.
• Productivity Solutions: Our productivity suite includes Axon Records, Axon Standards, and a suite of solutions available under our AI Era Plan, including Real-Time Translation, Draft One, Policy Chat, and Auto-Transcribe, among others. These offerings are designed to boost efficiency and improve decision-making through automation, data integration, and intelligent workflows.
• Real-time Operations: Our real-time operations capabilities, which include Axon Respond, integrates location data, signal alerts and video feeds to provide a complete picture of evolving situations as they occur.

In addition to subscription SaaS revenue, this segment includes non-recurring professional services revenue supporting implementation, configuration, and ongoing workflow integration, as well as revenue from certain on-premise software licenses.

Connected Devices

Our Connected Devices segment consists of hardware products that seamlessly integrate with our suite of software solutions to revolutionize our customers' capabilities for capturing, analyzing, and responding to real-world events. Revenue in this segment is derived from device sales, accessories, and related extended warranties. These products are designed to operate as a networked system and include devices such as cameras, sensors, drones, and personal protection equipment across the following three categories:

• TASER: We develop smart devices, tools and services that support public safety officers in de-escalating situations, avoiding or minimizing use of force and aiding consumer personal protection. TASER energy devices are used by public safety customers as a less-lethal force option to de-escalate conflict. Revenue is generated through device sales, cartridges, accessories, and extended warranties.
• Personal Sensors: Axon devices address many needs, including transparency, real-time situational awareness, and accurate capture and integration of evidence with software workflows. Product categories within personal sensors include Axon Body cameras and accessories. Our software solutions also support an open ecosystem of connected devices produced by other vendors.
• Platform Solutions: Platform Solutions include Axon Fleet in-car video systems, fixed cameras, drone and counter-drone technology, virtual reality (“VR”) training hardware, and other devices that support operational awareness.

Our research & development (“R&D”) investments support continuous innovation on behalf of our customers. Our financial strategy is to build highly recurring, highly profitable businesses and to drive growth through this purposeful product innovation.

1 Calculated as monthly recurring license, integration, warranty, and storage revenue for the year ended December 31, 2025*. Annual recurring revenue is a forward-looking performance indicator that management believes provides more visibility into the growth of our revenue generated by our highest margin, recurring services. Annual recurring revenue should be viewed independently of revenue and deferred revenue because it is an operating measure and is not intended to be combined with or to replace GAAP revenue or deferred revenue, as they can be impacted by contract start and end dates and renewal rates. Annual recurring revenue is not intended to be a replacement or forecast of revenue or deferred revenue.*

Sales and Distribution: Who We Sell To and Where We Deliver

Our core customers across the public and private sectors include U.S. federal, state, and local governments, international governmental entities, commercial enterprises, and consumers. Axon’s sales force and strong customer relationships represent key strategic advantages. Although the majority of our revenues are generated via direct sales, we also leverage distribution partners and third party resellers. No customer represented more than 10% of total net sales for the years ended December 31, 2025, 2024 or 2023. As we diversify into new markets, we have been investing in sales personnel and strategic headcount additions to support growth in these markets.

Resources

Manufacturing and Supply Chain

We perform manufacturing, final assembly and final test operations at our facilities in Arizona and own substantially all of the equipment required to develop, prototype, manufacture and assemble our finished products. We have continued to maintain both our ISO 9001 and our ISO 9001:2015 certifications.

We purchase many components and raw materials used in manufacturing our products from numerous suppliers in various countries. Although we currently obtain certain components from single source suppliers, we own substantially all injection-molded component tooling, designs and test fixtures used in production for all custom components. We continuously monitor our supply chain, identify alternate shipping and logistic sources, and work with foreign regulators so our suppliers can provide high quality parts. Supply chain disruptions are an ongoing occurrence and our continuous monitoring allows us to minimize their impact. For more information on the risks associated with manufacturing and supply chain, see “Item 1A. Risk Factors — Operational Risks”.

Intellectual Property

We protect our intellectual property with U.S. and foreign patents, U.S. and foreign trademark registrations, and U.S. copyright registrations. Our patents and pending patent applications relate to technology used by us in connection with our products. We also rely on international treaties, organizations and laws to protect our intellectual property. As of December 31, 2025, we hold over 370 U.S. patents, over 170 U.S. registered trademarks, over 350 international patents and over 480 international registered trademarks, as well as numerous pending patent and trademark applications.

We continuously assess whether and where to seek formal protection for particular technologies based on such factors as the significance to our operations and our competitors’ operations in particular regions, our strategies in different countries, and the degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions. We have the exclusive rights to many Internet domain names, primarily including “Axon.com,” “Evidence.com,” “TASER.com,” and “911.com.”

We also execute non-disclosure agreements with employees, consultants and key suppliers.

Competition

Sensors — Connected Cameras and Digital Evidence Management Software: The body camera and in-car video/automatic license plate readers industry is highly competitive. Our competition includes 10-8 Video Systems, 365Labs, Applied Concepts, Axis Communications, Coreforce, Digital Ally, Duress, Genetec, Getac, HALOS Body Cameras, Hikvision, Hytera, Insight LPR, IONODES, i-PRO, Kustom Signals, LensLock, Motorola Solutions, Tait Communications, Oracle, PatrolEyes, Pinnacle Response, Pro-Vision, Recoda, Reveal Media, Safe Fleet, Versaterm, Wireless CCTV, Wolfcom Enterprises, Wrap Technologies and Zepcam.

Our fixed automatic license plate recognition (“ALPR”) offerings, including Axon Outpost and Axon Lightpost, together with integrations enabled through our Works with Axon partnership program, compete with providers of fixed and semi-fixed ALPR cameras and associated analytics software used by public safety agencies and enterprise customers. Our competition in this area includes Flock Safety, Genetec (AutoVu), Jenoptik, Motorola Solutions (including its Vigilant and fixed LPR solutions), Neology (including its PIPS Technology business), NDI Recognition Systems, PlateSmart Technologies, and Rekor Systems.

The market for software solutions to improve public safety agency workflows is both highly fragmented and highly competitive. Our cloud-based digital evidence management system, Axon Evidence, competes with both cloud-based platforms and on-premises based systems designed by third parties or developed internally by an agency's technology staff. Our competition includes 365Labs, Coreforce, FileOnQ, FotoWare, Genetec, Guardify, i-PRO, Motorola Solutions, NiCE, Omnigo, OpenText Corporation, Oracle, Revir Technologies, Safe Fleet, Veritone, and Vidizmo.

Key competitive factors in these product categories include product performance and reliability; product features (including live-streaming, GPS tracking, pre-event buffering, real-time alerting and license plate recognition accuracy); battery life and power options; ease of deployment and integration with existing infrastructure; product quality and warranty; total cost of ownership; data security, privacy and information workflows; interoperability with other public safety systems; company reputation and financial strength; and customer satisfaction and relationships.

Productivity and Real-Time Operations Software — Records Management System (“RMS”) and Axon Fusus: The RMS vertical area is competitive and highly fragmented. We have identified more than 50 software providers, including 365Labs, Beacon Software Solutions, Caliber Public Safety (parent, Harris Computer Systems), Central Square Technologies, CivicEye, Coreforce, Core Technology Corporation, CSI Technology Group, EForce Software, Executive Information Services, Hexagon, LawSoft, Mark43, Motorola Solutions, Niche Technology, Oracle, Saab, SmartCop, Sopra Steria, Southern Software, Sun Ridge Systems, Tyler Technologies and Versaterm. In addition, not all law enforcement agencies use software for report writing — some still use paper. We believe our network of camera sensors and digital evidence management platform give us a strategic advantage in these product categories. Our Real Time Crime Center Platform, Axon Fusus, competes both with real-time operations platforms that ingest body camera video feeds, like Genetec's Citigraf, Motorola’s CommandCentral Aware, Coreforce’s Real Time Intelligence, Flock Safety’s FlockOS, Hitachi Vantara’s Visualization Platform, and MIDL Technology, as well as platforms that ingest video feeds exclusively from surveillance cameras, like Hexagon's Connect, Live Earth and Spatialitics's GeoShield.

Emergency Communications Software — 911 Data, AI and Call Handling Platforms: Our emergency communications solutions are designed for public safety answering points (“PSAPs”) and emergency communications centers. Today, these offerings primarily consist of cloud-based applications that operate alongside existing 911 call-handling systems and provide AI-powered triage, supplemental data and multimedia streaming capabilities. These include real-time video and text from callers, enhanced device location information and AI-enabled transcription, translation, call summarization and post-call analytics, derived in part from technologies we acquired with Prepared. These offerings compete with both over-the-top data and AI platforms that integrate with incumbent 911 infrastructure and with more fully integrated Next Generation 911 (“NG911”) platforms.

Furthermore, our acquisition of Carbyne, a provider of cloud-native emergency communications platforms that combine NG911 call-handling, location and multimedia capabilities with AI and rich data integrations, extends our offerings more deeply into the core call-handling layer of the NG911 workflow. Refer to Note 20 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

Our competition in this space includes CentralSquare Technologies (Vertex NG911 Call Handling), Hexagon AB (call-handling capabilities within its public safety platforms such as I/CAD and OnCall), Intrado Life & Safety (including its VIPER and Power 911 offerings), Motorola Solutions (including its VESTA 9-1-1, its other NG911 call-handling solutions and its Rave 911 suite), RapidSOS, Versaterm, and Zetron (MAX Call Taking), among other providers of NG911 call-handling, data and analytics platforms.

Key competitive factors in this product category include the reliability, resiliency and scalability of call handling and routing; support for NG911 standards and multimedia communications (including text, video, and rich device-generated data); the breadth and depth of integrations with computer-aided dispatch, mapping and other public safety software; the ability to leverage AI to assist telecommunicators, improve call-taking efficiency and quality assurance; cybersecurity and data privacy; the ability to integrate with a wide range of legacy and cloud-based PSAP infrastructure; ease and speed of deployment and migration from legacy systems; and overall total cost of ownership.

Draft One: The AI-enabled report narrative drafting space is relatively new but fast growing. We have identified several providers in this space, including Abel, Central Square Technologies’ Centerline AI, Clipr.ai, GovWorx, Karda Analytics, Mark43’s ReportAI, Motorola Solutions, Policereports.ai, and Truleo.

VR De-Escalation Training for Law Enforcement, Corrections and Private Security: Our VR Training platform competes with several other companies in the space who offer simulation scenarios, including simulated training on the use of both lethal and less lethal alternatives. Our competition in this space includes Adaptive VR, Apex Officer, Hologate, InVeris Training Solutions, Laser Shot, MILO, OperatorXR, Street Smarts VR, Ti Training Corp, V-Armed, VirTra and Wrap Technologies, among others.

Key competitive factors in this product category include scale of content library, integration to additional sensors and devices, ease of use, visual fidelity and realism, quality of immersion experience (enhanced by capabilities such as eye tracking and speech recognition) and portability.

Axon Air: Our end-to-end drone management software platform competes with several companies in the space who offer drone programs and flight management software solutions. Our competition in this space includes Auterion Ltd., BRINC Drones’ LiveOps, Flock Safety’s Aerodome, Motorola Solutions’ CAPE, Paladin Drones’ Watchtower, Versaterm’s DroneSense, and Votix, LLC. Key competitive factors in this product category include integration and compatibility with various drone hardware providers and other technology systems used by first responders (e.g., digital evidence management), drone program management and real-time situational awareness capabilities, intuitiveness of the user interface, the level of training and customer support provided (particularly for the drone-as-first-responder use case), the customization and flexibility allowed by the platform to meet specific operational needs and requirements of different customers (e.g., customizable flight restrictions) and the autonomy capabilities provided by the platform (e.g., creation of autonomous missions).

Our indoor tactical drone hardware platform, Sky-Hero, competes with several companies in the space, including BRINC, Cleo Robotics, Darkhive, DJI, Indoor Robotics, XTEND, FLIR and Flock Safety (through its acquisition of Uniform Sierra Aerospace). Key competitive factors in this product category include variety and weight limits of compatible payloads, battery life and associated flight range, maneuverability and size, autonomy and onboard intelligence (including ability to navigate in GPS denied environments), sensor and imaging technology, durability and robustness of the drone, cost and maintenance required, reliability and security of communication and control systems, the simplicity of the drone piloting user interface and the training required to operate the drones.

Dedrone: The counter drone space is fast growing and very fragmented. Within it, Dedrone competes with Advanced Protection Systems, Anduril, ApolloShield, ARTSys360, Aselsan, Belgian Advanced Technology Systems, Big Bang Boom Solutions, Bligther Surveillance Systems, BlueHalo, BSS Holland, CACI, Cerbair, Chess Dynamics, DEFSYS, Department 13, D-Fend, DroneDefence, Droneshield, Dynamite Global Strategies, DZYNE Technologies, EDGE, EdgeSource, Elbit Systems, ELT Group, ESG, Fortem Technologies, FN Herstal, General Atomics, Gradiant, Guardion, Havelsan, Hensoldt, Hertz New Technologies, IEC Infrared Systems, Indra, L3 Harris, Leidos, Leonardo DRS, LiveLink Aerospace, Lockheed Martin, Marduk, MBDA, MC2 Technologies, Meteksan Savunma, Metis, MSI Defense Systems, MyDefence, Northrop Grumman, NSO Group, Openworks, QinetiQ, Raytheon, Regulus, Rheinmetall, SAAB, SAIC, SAMI Advanced Electronics, Securiton, Sensofusion, Sentrycs, Sentry View Systems, Skycope, Skylock, Skysafe, SNC, Sopra Steria, SRC, Teledyne FLIR, Terma, Thales, TRD Systems, UAVOS, Unifly, Vector Solutions, Vigilant Drone Defense, Vorpal, Whitefox Defense, and Zen Technologies, among others.

Key competitive factors in this product category include the breadth and accuracy of detection sensors (e.g., pan-tilt-zoom cameras, radar, and acoustic) and multi-sensor fusion approaches, the chosen methodology for radio frequency-based detection (e.g., radio frequency signature matching or demodulation), integration of detection platforms with robust mitigation solutions (e.g., jammers, cyber-takeover, kinetic and high-energy), the capacity to improve detection through scale and continuous exposure to diverse drone makes and models in areas of high drone activity (e.g., urban centers, active war zones) and the seamless interoperability with existing security and defense ecosystems.

TASER for Professional Users: Our CEDs compete with a variety of less-than-lethal alternatives to firearms, including rubber bullets or rubber baton rounds, such as those made by Combined Systems, Inc.; pepper spray and pepper spray projectiles, such as those made by Byrna Technologies, Condor Non-Lethal Technologies, FN Herstal, PepperBall, and SABRE Corporation and Mace Security International; traditional stun guns, such as those made by UZI and Jolt; hand-held remote restraint devices involving a tether, such as those made by Wrap Technologies; laser dazzlers that cause temporary blindness, such as those made by B.E. Meyers & Co; stun grenades, such as those made by Combined Systems; long-range acoustic devices, such as those made by Genasys; and police batons and night sticks, such as those made by Monadnock and Armament Systems and Procedures. TASER devices offer advanced technology, versatility, portability, effectiveness, built-in accountability systems and low injury rates, which enable us to compete effectively against other less-than-lethal alternatives. TASER devices also offer connectivity to our cloud network, which allows law enforcement agencies and other professional users to more effectively manage their less-than-lethal programs and automate use-of-force reporting.

The key competitive factors in this product category include a device’s accuracy, effectiveness, reputation, safety, cost, ease of use, and exceptional customer experience. The design maturity of the TASER platform, as well as our development and sale of a multi-shot device, are also key competitive differentiators. We are aware of competitors providing competing CED products primarily outside of the United States.

TASER for Personal Safety: In the private citizen space, TASER devices compete with firearms and other less-than-lethal self-defense options such as stun guns and pepper spray-based products. Leading competitors in the less-than-lethal space include Byrna Technologies, Inc., Mace, PepperBall, SABRE, Salt Supply Co. and Vipertek. The TASER StrikeLight competes in the flashlight category, in which there are dozens, if not hundreds, of competitors, including tactical flashlight providers with and without stun gun capabilities.

Bolt 2 and Pulse 2 are not stun guns, and have different capabilities, including neuromuscular incapacitation functionality. The broader market for personal safety and home defense is far-reaching, and categories range from threat detection and accountability (e.g., dash and doorbell cameras), to home security (e.g., home alarms, locks and response services) to personal defense (e.g., firearms, stun guns, TASER devices, pepper spray, tactical flashlights and personal alarms), to personal tracking and emergency notification mobile applications.

The primary benefit of TASER devices is in less-than-lethal incapacitation. Other competitive factors include a device’s cost, effectiveness, safety, ease of use, and available training options.

Non-Axon trademarks are property of their respective owners. Axon Air, Axon Evidence, Axon Fusus, Dedrone, Draft One, TASER, TASER Bolt, TASER Pulse, and StrikeLight are trademarks of Axon Enterprise, Inc., some of which are registered in the U.S. and other countries.

Seasonality

Our business operations are influenced by customer budget and technology adoption cycles. Additionally, new product introductions can significantly impact the cadence of net sales, product costs and operating expenses. A larger share of our annual bookings traditionally occurs in the fourth quarter. However, historical seasonal patterns, customer budgets or historical patterns of product introductions should not be considered reliable indicators of our future net sales or financial performance.

Governmental Regulation

U.S. and foreign laws and regulations govern matters central to our business, including privacy and data protection; regulation of certain of our conducted energy devices (“CEDs”) as firearms; telecommunications and spectrum use; export controls; government procurement; environmental and sustainability requirements; economic and trade restrictions; and other regulatory regimes applicable to our products and operations. The application and interpretation of these laws are subject to change and may vary across jurisdictions. See “Item 1A. Risk Factors – Legal and Compliance Risks” for additional information.

Radio Spectrum and Unmanned Systems

Certain of our products use radio spectrum to provide wireless voice, data and video communications and are subject to U.S. and foreign regulations governing spectrum use, equipment authorization, and operating requirements. Products incorporating wireless technology include Axon Signal-enabled CEDs and accessories such as the TASER 7 CED, Signal Performance Power Magazine (“SPPM”), and TASER 10 CED, as well as future wireless-enabled CEDs.

We also offer unmanned aerial and ground-based systems, as well as products that detect, identify, track or mitigate such systems, all of which operate on radio spectrum and are subject to evolving regulatory frameworks, many of which continue to develop without comprehensive standards.

Changes in spectrum allocation, licensing requirements, equipment authorization standards, operating restrictions, or regulatory interpretations could delay product certification or deployment, require product modification or recertification, increase compliance costs, limit functionality, or restrict sales in certain jurisdictions, which could adversely affect our business and financial results.

CED Products and Related Operations

Our CEDs are subject to federal, state, local, and international laws that affect their classification, sale, export, and use.

U.S. Federal Regulation: Most of our currently offered CEDs are not classified as firearms by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) because they do not expel projectiles by the action of an explosive. However, the TASER 10 CED is classified as a firearm under the Gun Control Act of 1968 due to its propulsion design. Accordingly, the Company must maintain a federal firearms license to manufacture and sell the TASER 10 CED and is subject to ATF compliance inspections.

If the TASER 10 CED is made available to private citizen or enterprise customers, demand could be reduced because purchasers would be required to comply with applicable firearm transfer requirements. Changes in laws, regulations, or interpretations could result in additional products being classified or reclassified as firearms, which could adversely affect sales.

Export Controls and International Regulation: Our CEDs are classified as “crime control” products by the U.S. Department of Commerce (“DOC”), and exports from the U.S. generally require a DOC export license, except for sales to Canada. Delays in obtaining export licenses or classifications could adversely affect international sales. Although the TASER 10 CED is regulated by the ATF for domestic sales, its export classification remains consistent with other TASER CED models.

Certain aspects of CED development and production constitute controlled “technology” under U.S. export regulations. Access by foreign national employees within the U.S. may therefore require “deemed export” licenses. Failure to obtain required licenses could impair research, development, or production activities.

Foreign jurisdictions may restrict, regulate, or prohibit the importation, sale, possession, or use of CEDs. Certain jurisdictions treat our products as controlled or prohibited weapons under applicable arms brokering laws, which may require licenses that are discretionary and not guaranteed.

State and Local Regulation and Supply Chain Regulation: State and local governments may restrict the sale or use of CEDs, and changes in use-of-force laws or firearm classifications may affect demand, particularly for products such as the TASER 10 CED.

Our global supply chain and foreign operations are subject to evolving regulatory requirements, including import controls, licensing, recordkeeping, modern slavery and human rights disclosure laws, and related compliance obligations.

Federal Procurement Regulations

Our U.S. government business is subject to procurement regulations, including the Federal Acquisition Regulation, and related socioeconomic and statutory requirements. These requirements increase compliance costs and may affect the terms and conditions under which we provide products and services to government customers.

Privacy and AI Regulation

We are subject to evolving U.S. and foreign laws governing the collection, processing, storage, and transfer of personal and sensitive information, as well as the development and deployment of AI systems. AI capabilities are integrated across our product portfolio, and we market AI-enabled functionality to customers as part of our long-term product strategy. As a result, regulatory developments affecting AI systems may directly impact our products and services.

In providing solutions to public safety agencies, we process sensitive law enforcement and evidentiary information, increasing the potential impact of unauthorized access, disclosure, or misuse.

Certain jurisdictions restrict cross-border data transfers or impose data localization requirements, which could affect our operations. For example, the European Union’s (“EU”) General Data Protection Regulation and AI Act impose compliance obligations relating to personal data and AI system deployment. In the U.S., laws such as the California Privacy Rights Act provide enhanced consumer protections and create private rights of action for certain data breaches. Compliance with these and similar laws has required, and may continue to require, significant resources and may expose us to regulatory enforcement, litigation, and other liability.

Environmental Regulations

We are subject to U.S. and foreign environmental laws that restrict certain substances in our products and may impose end-of-life management obligations. These include EU directives governing hazardous substances and waste electrical and electronic equipment, as well as similar regimes in other jurisdictions.

Regulators are increasingly focused on per- and polyfluoroalkyl substances (“PFAS”), which may be present in certain products. Laws addressing reporting, restriction, or phase-out of PFAS are under consideration or being implemented.

Additional sustainability and climate-related disclosure requirements have been enacted or proposed in jurisdictions in which we operate, including the EU Corporate Sustainability Reporting Directive, the UK Streamlined Energy and Carbon Reporting regime, and California SB 253 and SB 261.

Human Capital Resources

We attract, retain and motivate top talent by offering equitable opportunities for growth and development, supported by strong compensation and benefits. As of December 31, 2025, we had more than 5,100 full-time employees and more than 1,200 temporary employees (which include contractors, interns and individual consultants). During 2025, the number of our full-time employees increased by approximately 1,000 or 24%, primarily in our sales and R&D organizations. Employee growth was further driven by our acquisitions that were completed in the year.

Our global benefits include broad-based stock grants and performance-based bonuses, comprehensive healthcare and retirement benefits, paid parental and family leave, commuter benefits, unlimited paid time off for U.S. exempt employees, and flexible leave options for non-exempt and international employees. We review our programs annually to ensure they align with market practices in the industries and countries where we operate.

We hire, evaluate, and promote employees based on merit, skills, and performance. We prioritize career advancement and internal mobility through mentorship and rotational programs, as well as access to self-directed virtual training platforms, role-specific on-the-job learning opportunities, and leadership and technical skill-building workshops. Our focus on development, combined with competitive benefits, enabled us to close the year with a regrettable attrition rate2 of less than 1.0%, below our annual goal of 1.0%. Employees reported a higher than 88% satisfaction score for feeling proud to work at Axon during our 2025 employee engagement survey and an 84% satisfaction score on recommending Axon as a great place to work.

The health and safety of our employees is of utmost importance. We conduct regular audits to ensure compliance with our health and safety guidelines and regulatory requirements. Our ultimate goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety programs.

2 Regrettable attrition is defined as rolling 12-month attrition of employees rated as top performing in the prior performance rating cycle.

Corporate Information

We were incorporated in Arizona in September 1993 as ICER Corporation. We changed our name to AIR TASER, Inc. in December 1993 and to TASER International, Incorporated in April 1998. In January 2001, we reincorporated in Delaware as TASER International, Inc. and, in April 2017, changed our name to Axon Enterprise, Inc.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports filed with or furnished to the SEC are available free of charge on our website at http://investor.axon.com as soon as reasonably practicable after we electronically file with or furnish to the SEC such material. We routinely post information that may be important to investors on our website at http://investor.axon.com and https://www.axon.com/newsroom, and we use these websites as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (Reg FD). The information on our websites, including information about our trademarks, is not incorporated by reference into or otherwise a part of this Annual Report on Form 10-K. The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Risk Factor Summary

The following is only a summary of the principal risks that may materially adversely affect our business, financial condition, results of operations and cash flows. The following should be read in conjunction with the more complete discussion of the risks we face, which are set forth more fully below.

Strategic Risks

• We substantially depend on continued acceptance of our products and services by law enforcement agencies worldwide, and any reduction in demand could materially adversely affect our business.
• We substantially depend on sales of our CEDs, and if these products do not continue to be widely accepted, our growth prospects, operating results and financial condition will be diminished.
• If we are unable to design, introduce, sell and deploy new products or new product features successfully, our business and financial results could be adversely affected.
• We face risks associated with rapid technological change and new competing products.
• Negative publicity could adversely impact sales, which could cause our revenues or operating results to decline.
• Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute shareholder value, or adversely affect our operating results.
• We may not successfully manage our growth or plan for future growth.

Operational Risks

• Unavailability of materials or higher costs could adversely affect our financial results.
• Material adverse developments in domestic and global economic conditions, or the occurrence of other sufficiently disruptive world events, could materially adversely affect our revenue and results of operations.
• Delays in product development schedules could adversely affect our revenues and cash flows.
• We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may receive no revenue in return.
• If our security measures or those of our third party providers, including cloud storage providers, are breached, resulting in unauthorized access to our or our customers’ data, it could undermine confidence in our network, data centers, and services leading to reduced customer use of our products and services and significant legal and financial exposure and liabilities.
• Catastrophic events could materially adversely affect our business prospects, operating results and financial condition.
• Uncertainty in the development, deployment, and use of AI in our products and services, as well as our business more broadly, could adversely affect our business and reputation.
• Defects or disruptions in our services could impact demand for our services and subject us to substantial liability.
• Defects in our products could reduce demand for our products or result in product recalls and result in a loss of sales, delay in market acceptance and damage to our reputation.
• Our international operations expose us to additional risks that could harm our business prospects, operating results and financial condition.
• We depend on our ability to attract and retain our key management, sales and technical personnel.
• Failure to comply with federal, state, or local regulations applicable to our firearm product, the TASER 10 CED, could result in governmental actions or litigation, potentially harming our business prospects, operating results and financial condition.
• Failure to maintain effective internal control over financial reporting may adversely affect our ability to report our financial condition and operating results in a timely and accurate manner, which may cause investor confidence to diminish and the value of our common stock to decline.
• Our revision and our restatement of previously issued consolidated financial statements may adversely affect investor confidence and could result in regulatory actions and stockholder litigation.

Financial Risks

• An increasing percentage of our revenue is derived from subscription billing arrangements that may result in delayed cash collections and may increase customer credit risk on receivables and contract assets.
• Our gross margin depends on a number of factors, including our product mix, cost structure and acquisitions we may make, any of which could cause our gross margin to fluctuate.
• Revenue for our SaaS products is recognized over multi-year contract terms, which may delay the reflection of new business in our operating results.
• Most of our end-user customers are subject to budgetary and political constraints, which may delay or prevent sales, result in cancellations, or lead to the non-renewal of contracts.
• The open bidding process introduces uncertainty in securing future contract awards.
• We hold the majority of our cash balances, some of which are not insured, at three depository institutions.
• Stock transactions may have a material, unpredictable impact on our operating results and may result in dilution to existing shareholders.
• Our financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local currencies.
• Unanticipated changes in our effective tax rate and additional tax liabilities could adversely affect our operating results and financial condition.
• Our revenue and operating results may fluctuate unexpectedly from quarter-to-quarter, which could impact our stock price.
• Our profitability could suffer from declines in fair value or impairment of our investments, including our strategic investments, and could fluctuate if the fair values of our investments increase.

Legal and Compliance Risks

• We may face personal injury, wrongful death, product liability and other liability claims that could harm our reputation and adversely affect our business prospects, operating results and financial condition.
• Other litigation, government inquiries and regulatory actions may result in significant costs and judgments and divert management attention from our business.
• We have in the past and may in the future be subject to intellectual property infringement and other claims, which could incur substantial litigation costs, result in significant damages awards, inhibit our use of certain technologies and divert management attention from our business.
• If we are unable to protect our intellectual property, the value of our brands and products may decrease and we may lose our competitive market advantage.
• We may be unable to enforce patent rights internationally, which may limit our ability to prevent our product features from being used by competitors in some foreign jurisdictions.
• The use of open-source software in our products, services and technologies may expose us to additional risks and harm our intellectual property rights.
• A variety of new and existing laws and/or interpretations could materially and adversely affect our business.
• Uncertainties with complex U.S. federal, state and local and foreign procurement laws and regulations could cause us to incur costs that could have a material adverse effect on our business, financial position, results of operations and cash flow.
• We are subject to evolving corporate governance and public disclosure regulations and expectations that could expose us to numerous risks.
• Our amended and restated bylaws include exclusive forum provisions that could increase costs to bring a claim, discourage claims or limit the ability of our shareholders to bring a claim in a judicial forum viewed by shareholders as more favorable for disputes.

Risks Related to our Indebtedness

• Fulfilling our debt obligations requires significant cash resources, which may exceed our available cash flow.
• The 2027 Note Hedge and Warrant transactions may impact the value of our common stock.
• We are exposed to counterparty risk with respect to the 2027 Note Hedge transactions.
• Our indebtedness contains restrictive covenants that could limit our operational flexibility and adversely affect the value of our common stock.

Our past financial performance may not be a reliable indicator of our future performance and historical trends should not be used to anticipate our results or trends in future periods because of the following factors and other variables affecting our operating results. You should carefully consider the trends, risks and uncertainties described below and other information in this Annual Report on Form 10-K and subsequent reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of the following trends, risks or uncertainties actually occurs or continues, our business prospects, financial condition, results of operations or cash flows could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

Strategic Risks

We substantially depend on continued acceptance of our products and services by law enforcement agencies worldwide, and any reduction in demand could materially adversely affect our business.

Our largest customer vertical is U.S. federal, state and local law enforcement. Axon has a customer relationship with a substantial number of federal, state and local law enforcement agencies in the United States. At any point, whether or not related to the performance of our products and services, law enforcement agencies may elect to no longer purchase or use our CEDs or other products and services. For example, we believe that in the past our sales were adversely impacted by negative coverage and publicity surrounding our products and services and their use and this could occur in the future, including as a result of factors beyond our control. If law enforcement agencies materially reduce or discontinue purchases of our products and services, our business prospects, operating results and financial condition will be materially adversely affected.

We substantially depend on sales of our CEDs, and if these products do not continue to be widely accepted, our growth prospects, operating results and financial condition will be diminished.

We derive a significant portion of our revenues from sales of CEDs and related products and services, whether sold individually or as part of a subscription plan offering. We anticipate that these products will continue to account for a significant portion of our revenue for the foreseeable future. If we cannot continue to meet customer demands or achieve more widespread market acceptance of these products, our business prospects, operating results, and financial condition will be materially adversely affected.

Additionally, our CEDs and other offerings or products could fail to maintain or attain sufficient customer acceptance for many reasons, some of which are beyond our control, including:

• our failure to predict market demand accurately, whether as a result of a failure to anticipate demand for product features or functionality or to supply offerings that meet this demand;
• real or perceived defects, errors or failures;
• negative publicity about product performance or effectiveness;
• delays in releasing to the market our improved offerings or enhancements, or defects, errors or failures while releasing such offerings or enhancements;
• failure to offer complementary products that enhance the functionality of our offerings;
• introduction or anticipated introduction of competing products; and
• budget constraints or other limitations for our customers.

A decrease in the selling prices of or demand for these products, or failure to maintain broad market acceptance, could significantly harm our competitive position, and adversely affect our business operating results and financial condition.

If we are unable to design, introduce, sell and deploy new products or new product features successfully, our business and financial results could be adversely affected.

Our future success will likely depend on our ability to develop new products or product features that achieve market acceptance in a timely and cost-effective manner and in a way that is responsive to customer demand. The development of new products and product features is complex, time-consuming and expensive, and we may experience delays or incur significant additional costs in completing the development and introduction of new products. We may choose to carry higher levels of inventory to mitigate the risk of production delays, which may expose us to an increased risk of obsolescence.

We have devoted, and continue to devote, significant resources to develop and deploy SaaS solutions to a large number of customers. If there is a substantial increase of new customers in a small window, we may have difficulty deploying these solutions in a way that meets market demand. Increases in customer demand may require us to change our information technology (“IT”) infrastructure, expand our IT infrastructure or replace our IT infrastructure entirely. Scaling and adapting our IT infrastructure is likely to be complex and require additional technical expertise. If we are required to make any changes to our IT infrastructure, we may incur substantial costs and experience delays or interruptions in our solutions. These delays or interruptions may cause customers to become dissatisfied with our solutions and move to competing providers. Our failure to accommodate increased traffic, increased costs, inefficiencies or failures to adapt to new technologies or customer requirements and the associated adjustments to our IT infrastructure could harm our business prospects, operating results and financial condition.

Additionally, customers’ requirements for these products are complex and varied. If we cannot develop scalable solutions that can be consistently configured for customers with minimal effort or maintain sufficient professional service resources to configure our products to meet the requirements of large numbers of customers in a timely and cost-effective manner, our ability to broadly scale SaaS solutions could be negatively impacted, and our business prospects, operating results and financial condition could be negatively impacted.

We cannot assure you that new products or product features will achieve market acceptance. If we fail to develop new products or new product features on a timely basis that achieve market acceptance, our business, financial results and competitive position could be adversely affected.

We face risks associated with rapid technological change and new competing products.

The technology associated with law enforcement devices and software is rapidly evolving. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete. In particular, AI and machine learning technologies are rapidly developing and as these technologies are incorporated into our products and the operations of our customers, the pace of change has in the past and may in the future continue to accelerate. Additionally, we expect our products to meet and keep pace with evolving security standards and requirements of our industry and customers, including those of the U.S. federal government and international governments. While we have some patent protection in certain key areas of our Axon devices, CEDs and SaaS technology, new technology may result in competing products that operate outside our patents and could present significant competition for our products, which could adversely affect our business, financial results and competitive position. Additionally, our competitors may develop competing technologies or products with superior features or lower costs, respond more quickly to emerging technologies, conduct more extensive marketing campaigns, or otherwise compete more effectively than we do. If we cannot compete effectively, our business and financial results could be adversely affected.

Negative publicity could adversely impact sales, which could cause our revenues or operating results to decline.

Our business depends on the reputation of the Axon brand. If we are unable to maintain the position of the Axon brand, our business may be adversely affected by diminishing the appeal of the brand to our customer base, resulting in lower sales and earnings.

Our reputation and our brands have in the past been, and could in the future be, damaged by negative publicity, whether or not merited. Negative publicity could relate to our company, our brands, our products, or other aspects of our business. We could experience negative publicity (which may be raised by consumer advocacy groups, third party interest groups, investors, employees or other stakeholders) for a variety of reasons, including product safety issues, threatened or pending legal or regulatory proceedings, product claims, advertising and promotional practices, sustainability or policy issues, materials sourcing or cybersecurity incidents. Negative publicity that damages one of our brands could be compounded by having an adverse effect on our other brands or our company as a whole.

In addition, unfavorable media or investor and analyst reports related to our industry, company, brand, marketing, personnel, operations, business performance, or prospects may affect our common stock price and the performance of our business, even if the publicity is not directly related to our company or our brands and even if the publicity is not accurate. Furthermore, the speed at which negative publicity is disseminated has dramatically increased through use of electronic communication, including social media outlets, websites and other digital platforms. Additionally, our employees' use of digital or social media platforms in ways that may not be aligned with our digital or social media policies could damage our reputation or brands. Our success in maintaining and enhancing our brand depends on our ability to adapt to rapidly changing media environments. Adverse publicity or negative commentary from any media outlet could damage our reputation, require us to expend substantial resources to remedy the damage or reduce the demand for our products and services, adversely affecting our business and financial results.

Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute shareholder value, or adversely affect our operating results.

Our business strategy has included, and may continue to include, acquiring or investing in complementary products, technologies, or businesses. Identifying, negotiating, and completing these transactions can be time-consuming, difficult, and expensive. In some cases, our ability to close such transactions depends on obtaining third party approvals, which are beyond our control. As a result, there can be no assurance that any announced acquisition or investment, will close on the anticipated timeline or at all.

Acquisitions and investments may present unforeseen operating, financial, or compliance challenges. Many of these challenges may arise from actions, omissions, business practices, contractual arrangements, or operational decisions of the acquired business or investee entity that occurred prior to or independently of our ownership or involvement. Integrating acquired personnel, operations, systems, technologies, and products or effectively managing the combined business can be complex, costly, and disruptive. Our ability to identify and assess material risks and liabilities through due diligence may be limited, particularly where sellers restrict access to information, transaction timelines are compressed, or we acquire a non-controlling interest. Anticipated benefits of such transactions may not materialize due to factors such as:

• inability to integrate or profitably benefit from acquired products, technologies (including AI and machine learning models), or businesses; inherited risks associated with AI or machine learning models (including model performance limitations, bias, explainability challenges, or reliance on training data) that may be incomplete, inaccurate, or subject to regulatory restrictions;
• failure to obtain required regulatory approvals, clearances or certifications;
• exposure to unexpected regulatory obligations, including those related to export controls, data protection, AI, or product safety, which could require significant investment to satisfy;
• unanticipated costs, liabilities, or risks related to litigation (including intellectual property claims and disputes, government inquiries, or regulatory actions); exposure to actual or alleged intellectual property infringement, misappropriation, or other intellectual property claims arising from the technologies, products, software, data, or business practices of an acquired company or an entity in which we hold a minority investment (including claims that pre-date our acquisition or investment, discontinuation of products, modification of technologies, commencement of licensing arrangements on unfavorable terms, or payment of damages, settlements, or ongoing royalties);
• identification of previously unknown cybersecurity vulnerabilities in acquired technologies that expose us to security or privacy risks;
• cultural misalignment with the acquired company, disruptions to our workplace environment, or adverse impacts on investor perception;
• unionization, labor organization efforts, or grievances leading to work stoppages, strikes, or operational disruptions;
• difficulties integrating accounting, financial reporting, and internal control systems, consistent with our corporate standards and the requirements of the Sarbanes-Oxley Act of 2002;
• difficulties supporting legacy products, software, or infrastructure of the acquired business;
• challenges aligning the acquired company’s revenue recognition policies and forecasting methods;
• write-downs or impairment of goodwill or other intangible assets if the acquired business underperforms expectations;
• credit risks, or other financial impacts associated with acquired customers or contractual obligations;
• challenges transitioning acquired customers to our systems, processes, and contractual terms, including risks related to contract assignability or change-of-control provisions;
• loss, modification, or non-renewal of government contracts, framework agreements, or sole-source arrangements following a change of control or integration into our operations;
• diversion of management’s attention and critical resources away from existing business priorities;
• disruption to relationships with existing customers, suppliers, or strategic partners;
• supply chain, manufacturing, or sourcing disruptions affecting acquired businesses;
• difficulties scaling manufacturing capacity, production volumes, or supply chain operations of acquired businesses;
• loss of key employees of the acquired business; and
• exposure to adverse tax consequences, deferred compensation or employment-related liabilities, or depreciation charges associated with the acquired assets.

In the case of minority or non-controlling investments, we may have limited ability to influence the strategic direction, governance, regulatory compliance, risk management, or operations of the investee business, may be subject to conflicts with other shareholders or founders, and may receive less timely or less complete information regarding the investee’s performance or risks.

We may finance acquisitions or investments through the issuance of equity or debt. The issuance of equity could dilute existing shareholders, and the issuance of debt could reduce liquidity or increase leverage and interest expense. Debt financing activities may also include restrictive covenants or repayment obligations that limit operational flexibility or our ability to pursue additional strategic transactions.

Significant acquisitions typically result in the recognition of goodwill and other intangible assets. If the acquired business does not perform as expected, we may be required to record non-cash impairment charges, which could materially affect our operating results and financial condition.

We cannot assure you that the anticipated benefits of any acquisition or investment will be realized, that projected synergies will materialize, or that we will not be exposed to unknown liabilities or risks. Integrating new assets, operations, or personnel is inherently uncertain and resource intensive. If we fail to successfully integrate or manage the acquired businesses or investment, including effectively addressing the risks described above, or if anticipated benefits do not outweigh incurred costs, our business prospects, operating results, and financial condition could be materially adversely affected.

We may not successfully manage our growth or plan for future growth.

Since our founding in 1993, we have experienced rapid growth. The growth and expansion of our business places a continuous and significant strain on our management, operational, and financial resources. Our operations, including our customer base, third party relationships, information technology systems, and internal controls and procedures may not be adequate to support further growth. Managing our growth will also require significant expenditures and allocation of valuable management resources, including the challenges of integrating, developing, and motivating a growing employee base in various countries around the world.

Our rapid growth may make it difficult to evaluate our future prospects. Our ability to forecast our future results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future growth. We have encountered in the past, and may encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If we fail to achieve the necessary level of efficiency in our organization as it grows, or if we are not able to accurately forecast future growth, our business could be harmed.

Operational Risks

Unavailability of materials or higher costs could adversely affect our financial results.

We depend on U.S. domestic and international suppliers for the delivery of components used in the assembly of our products. Our reliance on third party suppliers creates risks, including our ability to obtain adequate supply of components or sub-assemblies and both single or sole-source components used in the manufacture of our products. Further risks include reduced control over pricing and timing of delivery of components and sub-assemblies and potential effects of evolving international trade controls or other government-imposed supplier restrictions. We depend on suppliers of machined parts, injection molded plastic parts, printed circuit boards, semiconductors, custom wire fabrications and other custom and off-the-shelf parts for our products. Although we may implement long-term agreements with strategic suppliers to mitigate the risk of supply continuity, disruptions remain possible. However, for molded materials, because we own substantially all of the injection molded component tooling used in their production, we believe we could obtain alternative suppliers in most cases. We have programs to hold additional materials (such as resins, battery components, major semiconductors and other critical components) to mitigate supply interruptions and better manage costs.

Additionally, if our suppliers do not allocate sufficient production, decommit from agreed supply levels, or inaccurately forecast demand, we may face reduced access to components and need to secure new suppliers. As the scale of our hardware production increases, we need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities. If we are unable to accurately match the timing and quantities of component purchases to our actual needs, we may incur costs related to unexpected production disruption, storage, transportation, expedite, and write-offs, which may harm our business prospects and financial condition.

The TASER 10 CED presents additional supply chain challenges due to its unique design and regulatory requirements, including, for example, the regulation of imports and exports of certain TASER 10 CED components. We also purchase raw materials for TASER 10 CEDs from a limited number of suppliers, some of which may be subject to market price fluctuations that we may be unable to pass through to our customers. Because of the unique requirements of TASER 10 CEDs, we cannot change suppliers easily. Any delay or interruption in the supply of the raw materials that are used in TASER 10 CEDs could impair our ability to manufacture and deliver TASER 10 CEDs, harm our reputation, or cause a reduction in revenues.

A significant number of our raw materials or components comprise petroleum-based products or incur some form of landed cost associated with transporting the raw materials or components. Our freight and import costs and the timely delivery of our products could be adversely affected by the materialization or re-emergence of a number of factors that could reduce the profitability of our operations, including, for example: higher fuel costs; supply chain shortages; potential port closures or shipping disruptions; customs clearance issues; increased government regulation or regulatory changes for imports of foreign products into the United States and exports from foreign sources; and delays created by war, terrorist attacks or threats, public health issues, national disasters or work stoppages. We are also subject to supply chain disruption if any of our suppliers violate legislation that bans the import of goods based on their method of production, such as using forced labor or sanctioned raw material suppliers. This may also result in negative publicity regarding our production methods, and alleged unethical or illegal practices of any of our suppliers could adversely affect our reputation. Any interruption of supply for any material components of our products could significantly delay the shipment of our products and have a material adverse effect on our revenues, profitability and financial condition. For example, there have been and may continue to be disruptions in the semiconductor supply chain that could negatively impact our ability to make our products.

As significant tariffs or other restrictions continue to be placed on foreign imports by the United States, our sales and results of operations may be harmed. Recently, the U.S. government has indicated its intent to modify U.S. trade policy and, in some cases, to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. It has also imposed or has indicated its intent to impose increased tariffs on foreign imports into the United States, particularly from the People’s Republic of China (“PRC”), Mexico, and Canada. Such tariffs could have a significant impact on our business, particularly the importation of products used in our business that are manufactured outside the United States, which have resulted and could result in retaliatory tariffs imposed on products we export. We also source certain raw materials from foreign countries, as do some of our suppliers. The implementation of tariffs and trade restrictions as well as changes in trade policies between the United States and such foreign countries have resulted and could continue to lead to increases in our supply costs and make it more difficult to obtain suppliers and may have an adverse effect on our supply chain from a cost and sourcing perspective. If we attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective. Finally, tariffs and international trade arrangements may continue to change, potentially without warning and to an extent that is difficult to predict. Changing tariff rates and shifting trade regulations may create significant uncertainty for vendors, consumers, and us; may increase our merchandise costs; negatively impact consumer demand for our products and services; or otherwise negatively impact our operating results. We may not be able to forecast such impacts accurately. If we fail to manage these dynamics successfully, gross margins and profitability could be adversely affected. Increased tariffs or trade restrictions implemented by the United States could have a material adverse effect on our business prospects, operating results and financial condition.

Material adverse developments in domestic and global economic conditions, or the occurrence of other sufficiently disruptive world events, could materially adversely affect our revenue and results of operations.

Global economic uncertainty continues to pose risks to our business, driven by factors such as ongoing conflicts in the Middle East and Ukraine, the volatility of interest rates, high inflation, changes in U.S. immigration policy, an actual recession or fears of a recession, trade policies and tariffs, and geopolitical tensions. Our inability to offset price inflation in our materials, components, shipping or labor through increased prices to customers with long-term fixed-price contracts and formula-based or long-term fixed-price contracts with suppliers could adversely affect our business prospects, operating results and financial condition. Global supply chain and labor market challenges could also negatively affect our and our suppliers’ performance. Interest rate increases have also created financial market volatility and could further negatively impact financial markets, lead to an economic downturn or recession, or have an adverse effect on our financial results. Economic slowdowns can also negatively impact municipal and state tax collections and put pressure on law enforcement budgets, which may increase the risk that our customers will be unable to appropriate funds for existing or future contracts with us. In addition, geopolitical risks could affect our customers’ budgets and policies. These and other factors may adversely affect customer demand and ability to pay, cause decrease in sales, and negatively impact the realizability of our accounts and notes receivable and contract assets.

Delays in product development schedules could adversely affect our revenues and cash flows.

The development of CEDs, devices, sensors, and software is complex and time-consuming. Achieving market acceptance requires accurately anticipating customer needs and delivering products that adapt to evolving demands in a timely and cost-effective manner. Customers may require product features and capabilities that our current products do not have. If we fail to develop products that satisfy customer requirements, our ability to create or increase demand for our products could be adversely affected.

Without the timely and cost-effective introduction of new products, services, and enhancements, our offerings will likely become less competitive over time, in which case our competitive position and operating results could suffer. New products and services, and enhancements to existing products and services, can require long development and testing periods and significant investment, including substantial R&D, development of different engineering and manufacturing workflows, and adjustments to our data and analytics infrastructure. Our focus on our SaaS platform also presents complex development issues. Significant delays in new product or service releases or problems in creating new products or services could adversely affect our business, growth prospects, operating results, financial condition, and competitive position.

We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may receive no revenue in return.

Before committing to purchase our products, our end-user customers typically consider a wide range of issues such as product benefits, training costs, the cost to use our products in addition to or in place of other products, budget constraints and product reliability, safety and efficacy. Because we sell to various types of non-government and government entities of multiple sizes, including national agencies, state agencies, county agencies and municipal agencies, which can require varying levels of approvals followed by appropriations, the length of our sales cycle may range from a few weeks to as long as several years. Adverse publicity surrounding our products or the safety of such products has in the past, and could in the future, lengthen our sales cycle with customers. We believe that in the past our sales were adversely impacted by negative coverage and publicity surrounding our products or the use of our products. We may incur substantial selling costs and expend significant effort in connection with the evaluation of our products by potential customers before they place an order. If these potential customers do not purchase our products, we will have expended significant resources and received no revenue in return.

If our security measures or those of our third party providers, including cloud storage providers, are breached, resulting in unauthorized access to our or our customers’ data, it could undermine confidence in our network, data centers, and services leading to reduced customer use of our products and services and significant legal and financial exposure and liabilities.

Security breaches of our products and services could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our customers’ data. Additionally, breaches of our network or data security measures or those of our third party providers—including cloud storage providers, suppliers and vendors—could disrupt the security of our internal systems and business applications, impair our ability to provide products and services to our customers, result in product development delays, result in theft or misuse of our intellectual property or other assets, require us to allocate additional resources to improve technologies, or otherwise materially adversely affect our business. Supply chain vulnerabilities, such as compromised third party software, hardware, or components, could further expose our systems to cyber risks that could materially adversely affect our business.

Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently, grow more complex over time, and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. Delayed detection of sophisticated threats could allow attackers to remain undetected for extended periods, increasing potential damage to our operations, intellectual property, and customer data. Moreover, our security measures and those of our third party service providers or customers may not immediately detect such security breaches. Although we have developed systems and processes that are designed to protect our data and user data, and to prevent or detect data loss and security breaches, we have been in the past and are likely to remain a frequent target of cybersecurity intrusion attempts and we cannot assure that such measures will provide absolute security. We have in the past and may in the future incur significant costs to protect against or remediate cyber attacks.

We also face increasing and evolving disclosure obligations related to cyber and other security events. Despite rigorous processes, we risk failing to meet existing or future disclosure obligations or having our disclosures misinterpreted. National security or public safety considerations may also affect, or in limited instances prevent, public disclosure of a cybersecurity incident.

We devote significant resources to engineer secure products and ensure security vulnerabilities are mitigated, and we require our third party service providers to do so as well. Remote-work arrangements may increase our exposure to cyber attacks due to vulnerabilities in unsecured devices, networks, and employee environments. Breaches could occur during transfer of data-to-data centers or at any time, and result in unauthorized physical or electronic access to data. Third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information to gain access to our data or our customers’ data. Additionally, hackers may develop and deploy viruses, worms and other malicious software programs that attack or gain access to our networks and data centers. Recent developments in the threat landscape include the use of AI and machine learning by attackers to automate, enhance, and evade detection during cyber attacks, along with an increased number of cyber extortion and ransomware incidents. These attacks may involve higher financial ransom demands and demonstrate increasing sophistication, including novel ransomware techniques, diverse methodologies, and advance capabilities such as adaptive malware and deepfake-enabled phishing schemes. Increasing socioeconomic and political instability in some countries has heightened these risks. In addition, retaliatory acts by foreign governments in response to Western sanctions could include cyber attacks that could directly or indirectly impact our operations.

A security breach could expose us to a risk of loss or inappropriate use of proprietary and sensitive data, or the denial of access to such data. A real or perceived security breach could also result in reduced confidence in the security of our products and services, damage our reputation, disrupt our business, subject us to third party lawsuits, regulatory fines or investigations or otherwise subject us to legal liability, significantly harm our business prospects, operating results and financial condition. Even the perception of inadequate security may damage our reputation and negatively affect our ability to attract or to win new customers or retain existing customers.

Catastrophic events could materially adversely affect our business prospects, operating results, and financial condition.

A disruption or failure of our systems or operations in the event of a major earthquake, weather event, fire, water shortage, explosion, failure to contain hazardous materials, industrial accident, utility failure, cyber attack, terrorist attack, public health crisis, pandemic, or other catastrophic event could cause delays in completing sales, providing products and services, or performing other mission-critical functions. A catastrophic event that results in the destruction or disruption of any of our critical operations, or of the capacity, reliability or security of our information technology systems, could harm our ability to conduct normal business activities and our operating results, as well as expose us to claims, litigation and governmental investigations and fines. Such events may also jeopardize employee safety and availability, causing additional delays or operational challenges. In addition, catastrophes may put pressure on federal, state and municipal government budgets, which may increase the risk that our customers will be unable to appropriate funds for existing or future contracts with us. These and other factors may adversely affect customer demand and their ability to pay, cause decrease in sales, and negatively impact the realizability of our accounts receivable and contract assets. Furthermore, service delays or failures during such events could damage our reputation, especially with public safety customers, and erode trust in our ability to deliver reliable solutions during critical times.

Public health emergencies have adversely affected workforces, economies and financial markets globally, and led to an economic downturn in the past and may do so again in the future.

We may also face threats to our physical security, including to our facilities and the safety and well-being of our people. In addition to the potential catastrophic events described above, these threats could involve insider threats, workplace violence, or civil unrest, which could adversely affect our company. Our customers and suppliers face similar risks that, if realized, could also adversely impact our operations. Such acts could cause delays, manufacturing downtime, or other impacts that could detrimentally impact our ability to perform our operations. We could also incur unanticipated costs to remediate impacts and lost business.

If our backup and mitigation plans are insufficient to minimize business disruption, our financial results could be adversely affected. We are continuously monitoring our operations and intend to take appropriate actions to mitigate the risks arising from catastrophic events, but there can be no assurances that we will be successful in doing so.

Uncertainty in the development, deployment, and use of AI in our products and services, as well as our business more broadly, could adversely affect our business and reputation.

We offer systems and tools that incorporate AI technologies, including generative AI, for our customers. We also leverage and expect to continue leveraging AI-based technologies for internal use to drive efficiency. As with many new and emerging technologies, AI presents numerous risks and challenges to our internal business operations and our customers. For example, unexpected failures or inaccuracies in AI-driven systems could expose our customers to operational risks, particularly in high-stakes use cases such as law enforcement or public safety.

The development, adoption, integration and use of generative AI technology remains in the early stages and consequently, our AI technology may contain material defects or errors. Additionally, ineffective or inadequate AI or generative AI governance, development, use or deployment practices, including businesses we have acquired. or third parties could result in unintended consequences. For example, AI algorithms that we use may be flawed or may be (or perceived to be) based on datasets that are biased or insufficient. Biases in AI models could result in discriminatory outcomes, eroding trust among customers and communities we serve.

Any latency, disruption, or failure in our AI systems, third party AI systems that we utilize, or infrastructure could cause delays or errors in our offerings. Additionally, inadequate governance, testing, or quality assurance processes could result in flawed deployments, including those that result in physical harm or which produce erroneous or harmful outputs that may damage our reputation and expose us to legal liabilities. Correcting such defects or errors may be costly and time-consuming and could harm our business. Failure to adequately train customers or employees on the use and limitations of AI-driven features could also compound these risks. Thoroughly testing generative AI models is challenging due to their complexity and the unpredictability of their outputs. Developing, testing, and deploying resource-intensive AI systems may require additional investment and increase our costs. There also may be real or perceived social harm, environmental harm, unfairness or other outcomes that undermine public confidence in the deployment and use of AI. Furthermore, third parties may deploy AI technologies in a manner that reduces customer demand for our products and services. Competitive pressures may also drive rapid AI development or deployment, increasing the risk of releasing inadequately tested or unreliable features. Any of the foregoing may result in decreased demand for our products and services or harm to our business, financial results, or reputation.

The legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain, particularly in areas of intellectual property, cybersecurity, privacy, and data protection. For example, there is uncertainty around the validity and enforceability of intellectual property rights related to our development, deployment, and use of AI. Cyber attacks that use AI may also become increasingly frequent and effective. Additionally, third parties that license AI technologies to us may impose unfavorable licensing terms or terminate the licenses altogether, requiring us to seek licenses from alternative sources to avoid disruptions in feature delivery.

Compliance with new or changing laws, regulations, or industry standards relating to AI may impose significant operational costs and constrain our ability to develop, deploy or use AI technologies. In part due to our global scope and law enforcement customer base, we may face heightened scrutiny and regulatory requirements, which could further increase compliance costs and limit our ability to develop, deploy or use our AI solutions or other AI technologies. For example, the AI Act in the European Union imposes compliance requirements on a variety of AI uses by law enforcement, as well as on the companies that develop those products, including us. Other jurisdictions may adopt similar measures in the future. In the future, we may voluntarily or involuntarily initiate recalls if our products are determined by us or a regulatory authority to be noncompliant with applicable laws and regulations. Such recalls, whether voluntary or involuntary, could result in significant expense, supply chain complications, and may harm our brand, business, prospects, financial condition and operating results. Please also see “Operational Risks—Defects in our products could reduce demand for our products or result in product recalls and result in a loss of sales, delay in market acceptance, and damage to our reputation” for additional information.

We may also face increased scrutiny regarding data privacy and security risks related to the data we use to train and evaluate AI models, as breaches or misuse of this data and associated terms and conditions could expose us to significant liabilities. Additionally, there remains a significant risk in the nature of data used by third party providers to train the AI models we rely on, including whether such third party providers have trained AI models on data that they lacked rights to. Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory action, or brand and reputational harm.

Defects or disruptions in our services could impact demand for our services and subject us to substantial liability.

We rely on third party cloud service providers located in the United States and other countries to deliver our cloud services. The use of these cloud service providers gives us greater flexibility delivering a tailored, scalable customer experience, but also exposes us to additional risks and vulnerabilities. Lack of availability of this infrastructure could result from technical failures, natural disasters, fraud or security attacks that we cannot predict or prevent. Interruptions in our services, or loss or corruption of digital evidence, may reduce our revenue, require us to issue credits or pay penalties, expose us to litigation, lead customers to terminate their subscriptions, and adversely affect our renewal rates and ability to attract new customers.

Our business may also be harmed if our customers and potential customers believe our services are unreliable. Since our customers use our services for important aspects of their operations, any errors, defects, service disruptions or other performance problems could hurt our reputation and damage our customers’ operations. Additionally, the inability to recover or restore lost or corrupted digital evidence in a timely manner could result in significant reputational damage. This risk is particularly acute for law enforcement and public safety customers, where service reliability is critical, and disruptions could have serious operational or legal consequences. As a result, customers could elect not to renew our services or to delay or withhold payment. Delayed resolution of service outages or technical defects could also lead to prolonged dissatisfaction and erosion of customer trust. We could also lose future sales or customers may make warranty or other claims against us, which could result in increased warranty expense, longer collection cycles, reduced collectability of accounts receivable, reduced conversion of contract assets to cash, and increased expense and risk of litigation.

Defects in our products could reduce demand for our products or result in product recalls and result in a loss of sales, delay in market acceptance and damage to our reputation.

Complex components and assemblies used in our products may contain undetected defects that could be subsequently discovered at any point in the life of the product. Errors or defects in our products, including software-related errors or defects, may only be discovered after they have been tested, commercialized and deployed. In such event, we may incur significant additional development costs and product recall, repair or replacement costs, or liability for personal injury or property damage caused by such errors or defects. In particular, defects in products designed for public safety or law enforcement use could undermine customer and community trust, erode confidence in our brand, and result in heightened scrutiny or regulatory enforcement. Our reputation or brand may be damaged as a result of these problems and may result in difficulty retaining current customers and securing new contracts. Defects in our products could result in a loss of sales, delay in market acceptance, damage to our reputation and increased warranty costs, which could adversely affect our business, financial results and competitive position.

Additionally, we are subject to the U.S. Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement Act of 2008, which empowers the Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions. We could also face challenges with cross-border compliance if products are recalled in multiple jurisdictions, further increasing operational and financial burdens. Under certain circumstances, the Consumer Products Safety Commission or comparable foreign agencies could require us to repurchase or recall one or more of our products. If we were required to remove, or we voluntarily remove, our products from the market, our reputation could be tarnished, and we might have large quantities of finished products that we could not sell. A recall of critical components may also disrupt manufacturing and delay delivery of other products in our portfolio, compounding the adverse effect on our business.

Our international operations expose us to additional risks that could harm our business prospects, operating results and financial condition.

We have significant international operations and plan to continue growing internationally by acquiring existing entities and establishing new legal entities in additional markets. In certain international markets, we have limited operating experience and may not benefit from first-to-market advantages or otherwise succeed. Our international operations expose us to additional risks, including:

• restrictions on foreign ownership and investments, and foreign exchange controls, could limit our ability to repatriate cash earned in countries outside the United States;
• import and export requirements, tariffs, evolving interpretations and enforcement of U.S. Customs and Border Protection regulations and trade laws, trade disputes, product certification mandates, sanctions, foreign regulatory requirements, and government-imposed supplier restrictions could hinder our ability to offer products or services in certain countries or obtain necessary parts and components to manufacture products, increase associated costs such as duties, taxes, and compliance expenses, or lead to shipment holds, reclassification of goods, or changes to importer-of-record requirements;
• longer payment cycles in certain countries, heightened credit risk, and higher instances of payment fraud;
• uncertainty regarding liability for our products and services, including uncertainty resulting from local laws and lack of legal precedent; and
• differing labor laws and customs, existence of workers’ councils and labor unions, and other challenges caused by distance, language, and cultural differences

Our suite of products is export-controlled under both U.S. and international regulatory bodies. Changes in U.S. foreign policy, foreign governmental status, and international human rights policy objectives may impact Axon’s ability to obtain licenses for a given destination or customer.

Trade regulations include, among other categories, environmental regulations, climate- and sustainability-related regulations, tax and statutory financial regulations, export and import controls, customs and duties regulations, internal control and disclosure rules, privacy and data protection requirements, anti-corruption laws, and other local laws prohibiting corrupt payments to governmental officials, and competition regulations.

Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our directors, officers, or employees, as well as prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries. They could also materially adversely affect our brand, international growth efforts, ability to attract and retain employees, business, and operating results. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our directors, officers, employees, contractors, or agents will not violate our policies nor that enforcement actions by regulators will be consistent. Furthermore, inconsistent enforcement of local laws and regulations in some jurisdictions may increase compliance uncertainty and risk.

Our suppliers may themselves be subject to export controls or other trade restrictions on the materials and components they provide, including controls imposed by their countries of origin. In addition, increased use by the PRC of foreign “entity lists,” modeled in part on U.S. and other Western trade controls, could restrict Axon’s ability to import components or materials sourced from the PRC. Components or other items that are incorporated into our weapons or defense articles may also become subject to export controls in their originating jurisdictions based on their ultimate end use, which could further disrupt supply chains, delay production, or increase costs.

We depend on our ability to attract and retain our key management, sales and technical personnel.

Our success depends upon the continued service of our key management personnel, including Patrick Smith, our Chief Executive Officer. Although we have entered into employment agreements with our key personnel, including Mr. Smith, these agreements have no specific duration and constitute at-will employment, which means they may terminate their employment with us at any time. Additionally, we do not maintain any key person insurance on any of our officers or employees. Any changes in our senior management team, even in the ordinary course of business, may be disruptive to our business. Such changes may result in a loss of institutional knowledge and may cause disruptions to our business. Losing any member of our existing senior management team could also damage key seller relationships, lead to unanticipated replacement, recruitment and training costs, and make it more difficult to operate our business and achieve our business goals. Additionally, if our senior management team fails to work together effectively or execute our plans and strategies on a timely basis as a result of management turnover or otherwise, our business could be harmed.

Our success also depends on our ability to continue to attract, retain and motivate qualified technical employees. Our ability to compete effectively and our future success depends on our continuing to identify, hire, develop, motivate and retain highly skilled personnel. In particular, we compete with many other companies for employees with high levels of expertise in our industry, as well as for skilled engineers (including those with highly sought after experience in fields such as data science or AI), sales, and operations professionals. Job candidates may also be threatened with legal action under agreements with their existing employers if we attempt to hire them, which could impact hiring and result in a diversion of our time and resources. In addition, we are selective in our hiring process which requires significant investment of time and resources from internal stakeholders and management. At times, we have experienced, and we may continue to experience, difficulty in hiring personnel who meet the demands of our selection process and with appropriate qualifications, experience, or expertise, and we may not be able to fill positions as quickly as desired. In addition, our recruiting personnel, methodology, and approach may need to be altered to address a changing candidate pool and profile. We may not be able to identify or implement such changes in a timely manner.

Restrictive U.S. immigration policies and regulatory changes may also affect our ability to hire, mobilize or retain some of our global talent. Many of our technical personnel are foreign nationals entering the United States on work visas, primarily under the H-1B visa classification. The H-1B visa classification enables U.S. employers to hire qualified foreign nationals in positions that require an education at least equal to a bachelor’s degree. U.S. immigration laws and regulations are subject to legislative and administrative changes, as well as changes in the application of standards and enforcement. Future restrictions on the availability of work visas could restrain our ability to acquire the skilled professionals needed to meet our customers’ requirements, which could have a material adverse effect on our business. The scope and impact of these changes remain unclear, however a narrow interpretation and vigorous enforcement of existing laws and regulations could adversely affect the ability of entities with which we subcontract to utilize foreign nationals and/or renew existing foreign national consultants on assignment. There can be no assurance that we will be able to keep or replace all foreign nationals currently employed, or continue to acquire foreign national talent at the same rates as in the past.

In addition, our compensation arrangements, such as our equity incentives, may not always be successful in attracting new employees and retaining and motivating our existing employees. In particular, we may face challenges in hiring personnel, particularly for executive-level engineering talent, whether as a result of competition with other companies or other factors. We have had and expect to continue to have unique equity incentives designed to attract and retain long-term employees. We utilize these plans to align pay and performance and drive shareholder returns while reducing near-term cash expenditures. Our equity incentives and ongoing stock and option grants are subject to having sufficient shares under our stock plans and any new plans or increases in the number of shares available for grant under existing plans must be approved by our shareholders. If we are unable to obtain shareholder approval, we may be unable to attract and retain top talent, including senior executives. Our ability to attract, retain and motivate employees may also be adversely affected by common stock price volatility. The loss of the service of one or more of our key personnel could adversely impact our business prospects, operating results and financial condition.

Failure to comply with federal, state, or local regulations applicable to our firearm product, the TASER 10 CED, could result in governmental actions or litigation, potentially harming our business prospects, operating results and financial condition.

The TASER 10 CED is primarily regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”), which regulates the manufacture, sale and import of firearms in the United States primarily under the National Firearms Act of 1934, the Gun Control Act of 1968, and the Firearms Owners’ Protection Act of 1986, each as amended from time to time.

The ATF conducts periodic audits of our facilities that hold federal firearms licenses. If we fail to comply with ATF rules and regulations, the ATF may limit our activities or growth related to the TASER 10 CED, fine us, or, ultimately, suspend our ability to produce and sell the TASER 10 CED product line. Such audits may also expose operational inefficiencies or cause delays affecting production timelines or permitting. Also, various state and local laws, regulations, and ordinances relating to firearm characteristics, features and sales govern the TASER 10 CED product line. Axon and local distributors must comply with state and local laws, regulations, and ordinances pertaining to firearm and magazine sales in the jurisdictions where the TASER 10 CED is sold. Non-compliance with such laws, regulations, or ordinances could expose us to legal liability, reputational harm, and additional costs with remedying violations. Additionally, certain TASER 10 CED components are regulated for import into the United States by the ATF and are subject to ATF import permits that limit Axon’s ability to source from some suppliers and reduces supply chain flexibility. Supply chain constraints or an inability to source TASER 10 CED components could have a material adverse effect on our operating results and financial condition.

Federal and state legislatures frequently consider legislation relating to the regulation of firearms, including the amendment or repeal of existing legislation. Existing laws may also be affected by future judicial rulings and interpretations. These possible changes to existing legislation or the enactment of new legislation may seek to restrict firearm design or features, mandate specific technologies, remove existing legal defenses, impose minimum age requirements, or restrict the sale or ownership of certain firearms or accessories. In addition, evolving public sentiment or political pressure regarding firearm regulation could impact customer demand for TASER 10 CEDs, especially in jurisdictions with stricter firearm laws. Such restrictions or bans could have a material adverse effect on our business prospects, operating results and financial condition.

Failure to maintain effective internal control over financial reporting may adversely affect our ability to report our financial condition and operating results in a timely and accurate manner, which may cause investor confidence in our company to diminish and the value of our common stock to decline.

Preparing our consolidated financial statements involves many complex manual and automated processes, which depend on individual data input or review and require significant management judgment. The increasing complexity of our operations, including growth in international markets and expansion of product offerings, further heightens the risk of control deficiencies. Acquired businesses may have insufficient internal controls, which may have been identified or unidentifiable during diligence, that could require significant remediation efforts and create additional risks of financial misstatements during integration. One or more of these processes may result in errors that may not be, and in the past have not been, immediately detected and could result in a material misstatement or other errors in our consolidated financial statements, particularly when implementing new systems, processes, or complex accounting standards. The Sarbanes-Oxley Act of 2002 requires, among other things, that as a publicly traded company we disclose whether our internal control over financial reporting and disclosure controls and procedures are effective.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. While we continually undertake steps to improve our internal control over financial reporting as our business changes, we may not be successful in making the improvements and changes necessary to be able to identify and remediate control deficiencies or material weaknesses on a timely basis. We have successfully remediated the previously identified material weakness related to our convertible debt arrangement as of June 30, 2025, but we have not yet remediated the previously identified material weakness related to revenue recognition as of December 31, 2025. Refer to Item 9A of this Annual Report on Form 10-K for additional details. If we cannot successfully remediate identified control deficiencies, including any current or future material weaknesses in our internal control over financial reporting: the accuracy and timing of our financial reporting may be adversely affected; our liquidity, access to capital markets and perceptions of our creditworthiness may be adversely affected; we could face difficulty forecasting our financial results accurately, impacting decision-making by investors and analysts; we may be unable to maintain compliance with securities laws, stock exchange listing requirements and debt instruments’ covenants regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; investors may lose confidence in our financial reporting; we may suffer defaults under our debt instruments; and our common stock price may decline.

Our revision and our restatement of previously issued consolidated financial statements may adversely affect investor confidence and could result in regulatory actions and stockholder litigation.

We have previously revised certain of our previously issued financial statements to correct errors related to our historical conclusions of principal vs. agent accounting under Accounting Standards Codification, Revenue from Contracts with Customers (“ASC 606”). Furthermore, as described in our amended 2024 Annual Report on Form 10-K/A, we have restated certain of our previously issued financial statements to correct an error related to the classification of the 2027 Notes between current liabilities and long-term liabilities. These items may have the effect of eroding investor confidence in our financial reporting and harming our reputation.

Such revision or restatement may also result in stockholder litigation against us, or adverse regulatory consequences. Any such regulatory consequences, litigation, claim or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business prospects, operating results and financial condition.

Financial Risks

An increasing percentage of our revenue is derived from subscription billing arrangements that may result in delayed cash collections and may increase customer credit risk on receivables and contract assets.

Our strategy includes maintaining a significant portion of our business through a subscription model, which aligns with the municipal budgeting process of our customers and allows for multiple product offerings to be combined into existing subscriptions. This approach differs from a traditional hardware sale, where the entire hardware payment is commonly invoiced upon shipment, by spreading payments over the subscription or installment period. While this model provides predictable recurring cash flows, it may adversely impact liquidity because cash is received over time rather than upfront.

We record an estimate of expected credit losses and perform ongoing reviews of trade accounts receivables. However, if we become aware of information related to the creditworthiness of a major customer, or if future actual default rates on receivables differ from those currently anticipated, we may have to adjust our expected credit loss reserve. Such adjustments could negatively impact earnings and require additional resources for collections or restructuring customer payment terms. Furthermore, our reliance on municipal and government customers may heighten the risk of delayed payments during periods of political or economic instability, such as government shutdowns or reduced tax revenues. Any of these factors could adversely affect our business prospects, operating results and financial condition.

Our gross margin depends on many factors, including our product mix, cost structure, and acquisitions we may make, any of which could cause our gross margin to fluctuate.

Our gross margin could decline in future periods due to various factors, including:

• changes in product mix;
• changes in shipment volume;
• increased warranty costs;
• sales discounts;
• expanding into new markets or lower-margin markets, including through acquisitions or internal development;
• higher production costs;
• increases in materials, labor, manufacturing, or supply chain logistics costs;
• excess inventory and obsolescence charges;
• increased amortization of purchased intangible assets, including from acquisitions; and
• how well we execute on our strategy and operating plans.

Any of these factors could result in significant fluctuations in our gross margin. Such variability could lead to our inability to meet internal expectations or those of securities analysts or investors for a particular period. Failure to meet or exceed such expectations may adversely affect the market price of our stock.

Revenue for our SaaS products is recognized over multi-year contract terms, which may delay the reflection of new business in our operating results.

Our SaaS revenue is generally recognized ratably over the terms of the contracts. As a result, most of the SaaS revenue we report each quarter is the result of agreements entered into during previous quarters. Consequently, current trends, whether positive or negative, may not be fully reflected in our revenue results for several periods, and a decline in new or renewed SaaS contracts in any period may not be immediately reflected in our reported financial results, but could result in a decline in our revenue in future reporting periods. If any of our assumptions about revenue from our SaaS delivery model are incorrect, our actual results could differ materially from those anticipated, estimated, or projected.

Most of our end-user customers are subject to budgetary and political constraints, which may delay or prevent sales, result in cancellations, or lead to the non-renewal of contracts.

A significant portion of our end-user customers are government agencies, which typically lack direct control over their budgets. These budgets are often influenced by legislative processes and political considerations, limiting the agencies' ability to allocate funds at their discretion. There can be no assurance that the economic and political pressures will not materially adversely affect sales of our products.

Additionally, government procurement processes are often subject to scheduling delays and uncertainties, which can disrupt anticipated sales. Federal agencies, in particular, are vulnerable to broader governmental challenges, such as funding and debt limit constraints, including government shutdowns, such as the latest shutdown in 2025 and similar funding disruptions.

While we enter into contracts for the delivery of products and services in the future, and anticipate that these contracts will be completed, if agencies fail to appropriate funds in future year budgets, terminate contracts for convenience, or if other cancellation clauses are invoked, this would prevent us from recognizing anticipated revenue and cash flow. Contracts terminated without cause generally allow us to recover only our incurred costs, committed expenses, and a portion of profits, if any, on the work completed prior to termination. We may or may not be able to recover all the costs incurred during the start-up phase of a terminated contract.

The unexpected termination of significant contracts could result in substantial revenue shortfalls. If these shortfalls are not offset by corresponding reductions in expenses, our financial performance and overall business could be adversely affected. We cannot anticipate if, when, or to what extent our customers might terminate their contracts with us.

The open bidding process introduces uncertainty in securing future contract awards.

Governmental agencies often procure products and services through an open bidding process, which typically involves publishing a list of requirements and soliciting proposals from potential vendors. To compete successfully, we must accurately estimate our cost structure for servicing a proposed contract, the time required to establish operations for the proposed customer, and the likely terms of competing proposals submitted. However, we cannot guarantee that we will win future bids or that any winning bids will ultimately result in contracts on favorable terms.

Our contracts typically have fixed terms with early termination rights, with the possibility of extension at the discretion of the contracting entity. When these contracts expire, contracts may be reopened to competing bidders, and there is no guarantee that the contracts will be renewed or extended. In some cases, customers may initiate the bidding processes earlier than expected, resulting in increased competition prior to the anticipated end of contracts. Many of our contracts include termination for convenience provisions that may allow our customers to terminate the contract earlier than their term length.

Failure to secure new contracts, retain existing ones, or negotiate favorable terms through the open bidding process could adversely impact our revenues, profitability, and overall financial performance.

We hold the majority of our cash balances, some of which are not insured, at three depository institutions.

We hold the majority of our cash and cash equivalents accounts at three depository institutions. Our balances with these and other institutions regularly exceed Federal Deposit Insurance Corporation insurance limits for domestic deposits, as well as various foreign deposit insurance programs. For additional discussion, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

If any of these depository institutions were to fail, and their assets were insufficient to cover deposits, or if governments did not take action to support deposits exceeding existing insurance limits, we could incur losses related to the uninsured balances. Such losses or delays in accessing funds could materially and adversely affect our liquidity, operating results, and financial condition.

Stock transactions may have a material, unpredictable impact on our operating results and may result in dilution to existing shareholders.

We have historically granted and expect to continue to grant stock-based compensation to employees and non-employee directors as a means of attracting and retaining highly qualified personnel. All stock-based awards are required to be recognized in our financial statements based on their grant date fair values. The amount recognized for stock-compensation expense could vary depending on a number of assumptions or changes.

Changes in subjective and probability-based assumptions can materially affect the estimates of the fair value of the awards and timing of recognition of stock-based compensation expense and, consequently, the related amount recognized in our consolidated statements of operations and comprehensive income (loss).

As we continue to mature, the incentives to attract, retain and motivate employees provided by our equity awards or by future arrangements may not be as effective as in the past. We may also issue equity securities to pay for acquisitions and grant stock-based awards to retain the employees of acquired companies. If we issue significant equity awards to attract additional employees or to retain our existing employees or those related to acquisitions, we could incur substantial additional stock-based compensation expense and the ownership of our existing shareholders would be further diluted, which could depress the market price of our stock.

Our financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local currencies.

For international customers (whether current or potential) whose contracts are or would be denominated in U.S. dollars, the relative change in local currency values creates relative fluctuations in our product pricing. These changes in international end-user costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets. 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.

For non-U.S. dollar denominated sales, a weakening in foreign currencies relative to the U.S. dollar generally leads us to raise international pricing, potentially reducing demand for our products. Should we decide not to raise local prices to fully offset the U.S. dollar strengthening, the U.S. dollar value of our foreign currency denominated sales and earnings would be adversely affected. We do not currently engage in hedging activities related to fluctuations in foreign currency. Fluctuations in foreign currency may affect the U.S. dollar value of our foreign denominated assets and liabilities, including accounts receivable. As a result, amounts collected on foreign currency sales may be less than anticipated, reducing profitability.

We also import selected components that are used in the manufacturing of some of our products. Although our purchase orders are generally in U.S. dollars, a weakening of the U.S. dollar could increase component costs.

Unanticipated changes in our effective tax rate and additional tax liabilities could adversely affect our operating results and financial condition.

We are subject to income taxes in the United States and various other jurisdictions. Our effective tax rate could be impacted by changes in statutory tax rates, the geographic distribution of our earnings, and the application of top-up taxes introduced under global minimum tax regulations of the Organization for Economic Co-operation and Development (“OECD”) framework. Our tax expense could also be impacted by changes in non-deductible expenses, excess tax benefits from stock option exercises and RSU vesting, adjustments to the valuation of deferred tax assets and liabilities, the applicability of withholding taxes, and changes in unrecognized tax benefits. Although we believe our tax estimates are reasonable, the ultimate tax determination involves significant judgment that could become subject to audit by tax authorities in the ordinary course of business. Our estimates are based on information available to us at the time we prepare the income tax provision.

We are subject to potential tax examinations in multiple jurisdictions. While we regularly evaluate new information and adjust our tax positions as appropriate, there is no guarantee that the outcome of these examinations will not adversely affect our operating results and financial condition.

Our tax provision could also be impacted by changes in U.S. federal, state, local, or international tax laws, including significant tax reforms targeting multinational corporations, and proposals by the current or future administrations.

Additionally, we may be subject to tax liabilities due to changes in income-based taxes resulting from changes in U.S. federal, state, local, or foreign tax laws, changes in tax jurisdictions’ administrative interpretations, decisions, policies and positions, results of tax examinations, settlements or judicial decisions, changes in accounting principles, changes to our business operations, including acquisitions, as well as the evaluation of new information that results in a change to a tax position taken in a prior period.

Furthermore, recommendations from the OECD for a global minimum income tax and other changes are being implemented or considered in jurisdictions where we operate. While we believe enactment of the recommended framework in such jurisdictions will result in minimal impacts to our financial results in the near term, the impact of any new tax legislation may differ materially from our estimates due to future regulatory guidance or changes in our interpretations or assumptions.

Our revenue and operating results may fluctuate unexpectedly from quarter-to-quarter, which could impact our stock price.

Several factors, including some beyond our control, may affect our revenue and operating results, potentially causing our common stock price to fluctuate, including:

• budgetary cycles of municipal, state, and federal law enforcement and corrections agencies;
• market acceptance of our products and services;
• the timing of large domestic and international orders;
• the outcome of any existing or future litigation;
• adverse publicity surrounding our products, including product safety or use;
• changes in our sales mix;
• new product introduction costs;
• increases in raw material costs;
• changes in our operating expenses, including stock-based compensation expense;
• changes in foreign currency exchange rates, inflation, and interest rates;
• inventory obsolescence;
• changes in warranty reserves;
• existing or future tariffs;
• government shutdowns or lapses in federal appropriations; and
• regulatory changes that may affect the marketability of our products and services.

As a result of these and other factors, we believe that short-term period-to-period comparisons of our operating results may not provide meaningful insights, and our performance in a particular period may not be indicative of our performance in any future period. Additionally, fluctuations in our revenues and operating results could adversely affect the market price of our common stock.

Our profitability could suffer from declines in fair value or impairment of our investments, including our strategic investments, and could fluctuate if the fair values of our investments increase.

We invest a portion of available funds in a portfolio consisting of securities of various types. Our investments consist of both marketable and non-marketable securities. Investments in marketable securities are measured at fair value on a recurring basis. We generally have elected to apply the measurement alternative for non-marketable securities. Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes and we assess for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our future investment income may fall short of expectations due to changes in interest rates, or due to certain inherent risks involved in investments in early-stage privately held companies. For example, we have recognized and may in the future recognize an unrealized loss on an investment if we determine that our carrying amount for an investment without a readily determinable fair value is not expected to be fully recovered, which would cause our earnings performance to suffer from such losses. Contrastingly, we have recorded and may in the future record an unrealized gain on an investment if we determine the fair value exceeds the carrying amount, which would increase volatility in our earnings performance.

Legal and Compliance Risks

We may face personal injury, wrongful death, product liability and other liability claims that could harm our reputation and adversely affect our business prospects, operating results and financial condition.

Third parties often use our CED products in aggressive confrontations that may result in serious, permanent bodily injury or death. Our CED products may be associated with these injuries. A person, or the family members of a person, injured or killed in a confrontation or otherwise in connection with the use of our products, may bring legal action against us to recover damages on the basis of a number of theories, including wrongful death, personal injury, negligent design, defective product, product performance issues, or inadequate warnings or training. We are currently subject to a number of such lawsuits and have been and may be in the future subject to significant adverse judgments and settlements. We may also be subject to lawsuits alleging criminal misuse of our products. We have no control over how our products are used by our customers or other end-users and cannot ensure they are used consistent with our specifications, design and warnings. While our products are designed to be non-lethal, we cannot guarantee they will be used in a manner consistent with their intended use and any misuse exposes us to litigation, reputational harm and controversy.

Although we maintain product liability insurance in amounts that we believe are reasonable, we may not be able to maintain such insurance on acceptable terms, if at all, and product liability claims could result in a potential award of monetary damages in excess of the amount of insurance coverage available to us. Because we manufacture and sell CEDs, insurance carriers may decide not to insure our products or our company in the future.

We also face exposure to class action lawsuits related to the design, performance, safety, pricing or advertising of our products. Such class action lawsuits could also result in substantial monetary judgments, defense costs, business distraction, reallocation of internal resources, injunctions related to the sale of products and reputational harm.

If successful, the aforementioned claims could result in adverse judgments or unfavorable settlements, significant legal expenses, the diversion of management’s attention and resources, and reputational harm. The outcome of any litigation is inherently uncertain and there can be no assurance that our existing or any future litigation will not have a material adverse effect on our business prospects, operating results and financial condition.

Other litigation, government inquiries and regulatory actions may subject us to significant costs and judgments and divert management attention from our business.

We have been and could in the future be involved in litigation, government inquiries and regulatory matters relating to our products, contracts, employees and business relationships, including litigation against persons or entities we believe have infringed on our intellectual property, infringement litigation filed against us, litigation against a competitor, antitrust litigation, and enforcement actions filed against us. See discussion of litigation in Note 11 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Such matters have resulted, and are expected to continue to result in, substantial costs to us, including in the form of attorneys’ fees and costs, damages, fines or other penalties, whether pursuant to an adverse judgment or settlement, and the diversion of management’s attention, which could adversely affect our business prospects, operating results and financial condition.

We have in the past and may in the future be subject to intellectual property infringement and other claims, which could incur substantial litigation costs, result in significant damages awards, inhibit our use of certain technologies and divert management attention from our business.

Many companies own intellectual property rights that are directly or indirectly related to public safety technologies. These companies periodically demand licensing agreements or engage in litigation based on allegations of infringement or other violations of their patents, trademarks, copyrights or trade secrets. Some companies may also allege that their patents protect features essential to particular technical standards. Non-practicing entities may also hold patents that are directly or indirectly related to public safety technologies. These entities may seek compensation for perceived infringement of their patents, including by filing claims against us, regardless of the merit of any such claims. As we enter new markets, expand into new product categories, and otherwise offer new products, services and technologies, additional intellectual property claims may be filed against us by these companies, entities and other third parties. Our use of AI tools may also increase the likelihood of intellectual property claims. Intellectual property claims may also be filed against us as our current products, services and technologies gain additional market share.

If our products, services or technologies were found to infringe a third party’s proprietary rights, we could be forced to discontinue use of the protected technology or enter into costly royalty or licensing agreements to be able to sell our products, services or technologies. Such royalty and licensing agreements may not be available on terms acceptable to us or at all. We could also be required to pay substantial damages, fines or other penalties, indemnify customers or distributors, cease the manufacture, use or sale of infringing products or processes and/or expend significant resources to develop or acquire non-infringing technologies. Our suppliers may not provide, or we may not be able to obtain, intellectual property indemnification sufficient to offset all damages, fines or other penalties resulting from any claims of intellectual property infringement brought against us or our customers. Our efforts to identify relevant intellectual property rights may not identify all potential rights holders. Rights holders may demand payment for past infringements and/or force us to accept costly license terms or discontinue use of protected technology and/or works of authorship that may include, for example, photos, videos and software. Our development and sale of software-based products, including that which is related to AI or virtual reality, further increases this risk.

If we are unable to protect our intellectual property, the value of our brands and products may decrease and we may lose our competitive market advantage.

Our future success depends upon our proprietary technology. Our protective measures for this proprietary technology include patents, trademarks, copyrights and trade secret protection. However, these protective measures, as well as our efforts to pursue such protective measures, may prove inadequate. In certain countries, the value of intellectual property protection may not be apparent until after such protection can no longer be pursued. As such, our intellectual property protection may not extend to all countries in which our products are distributed or will be distributed in the future. Though we work to protect our innovations, we may not be able to obtain protection for certain innovations, including certain software-based products. Furthermore, any use of AI tools to create content or code that may be incorporated into our products or services may also impact our ability to obtain or successfully defend certain intellectual property rights. The scope of any patent protection we have obtained, or may obtain, may not prevent others from developing and selling competing products. Despite our efforts, any intellectual property protection we obtain may be later determined to be insufficient or ineffective.

Our protective measures may prove inadequate for reasons outside of our control. Varying intellectual property laws across countries may lead to differences in protection between such countries. In certain countries in which our products are distributed, the ability to effectively enforce intellectual property rights may be limited or unavailable. Patent requirements differ by country and certain domestic or international laws may prohibit us from satisfying these requirements, creating a risk that some of our international patents may become unenforceable. Patents for older technologies, such as those first introduced in our TASER M26 CED and TASER X26 CED, have expired or will expire due to statutory limits on patent terms. Despite policies and efforts to maintain secrecy of trade secrets and other confidential information, such information could be compromised by employees, partners or other third parties.

Once established, there is no guarantee that our intellectual property rights will remain in force. Issued patents may be challenged or re-examined and ruled invalid or unenforceable. Our registered trademarks may also be diminished or lost. For example, there is a risk that our “TASER” trademark could become synonymous with the general product category of “conducted energy devices” resulting in claims of genericness that could interfere with our enforcement efforts and create customer confusion as to product source. The right to stop others from misusing our trademarks and service marks in commerce depends, in part, on our ability to show enforcement of these rights. Our efforts to stop improper use, if ineffective, may lead to the loss of trademark and service mark rights, brand loyalty and notoriety among our customers and prospective customers.

Regardless of the outcome, the prosecution of patent and other intellectual property claims is both costly and time-consuming. Unauthorized use of our proprietary technology could divert our management’s attention from our business and could result in a material adverse effect on our business prospects, operating results and financial position.

We may be unable to enforce patent rights internationally, which may limit our ability to prevent our product features from being used by competitors in some foreign jurisdictions.

Our U.S. patents protect us from the importation of infringing products into the United States. We have filed applications for patents in foreign countries; however, these may be inadequate to protect markets for our products in these foreign countries. Each patent is examined and granted according to the law of the country where it was filed regardless of whether a U.S. patent on similar technology was granted. Certain foreign countries have patent working requirements that require a patent owner to practice a patented invention within the respective country. A patent in a foreign country may be subject to cancellation, forfeiture, compulsory license or other penalty if the claimed invention has not been worked in that country. Meeting the requirements of working an invention differs by country and ranges from sales in the country to manufacturing in the country. U.S. export law, or the laws of some foreign countries, may prohibit us from satisfying the requirements for working the invention, creating a risk that some of our international patents may become unenforceable. In a country in which we do not have a patent or a country in which our patent in that country is unenforceable or unenforced, other companies and makers of similar products may be able to copy our products or features of our products without consequence, thus limiting our ability to capture market share or protect our technology, which could materially harm our business prospects and operating results.

The use of open-source software in our products, services and technologies may expose us to additional risks and harm our intellectual property.

Open-source software is typically freely accessible, usable and modifiable. Certain open-source software licenses require a user who distributes the open-source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software or require the user of such software to make any derivative works of the open-source code available to others on potentially unfavorable terms or at no cost. The terms of many open-source licenses have not been interpreted by courts, and there is a risk that those licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our products, services and technologies. In that event, we could be required to seek licenses from third parties to continue offering our products, to re-develop our products, to discontinue sales of our products or to release our proprietary software code under the terms of an open-source license, any of which could harm our business.

Although we aim to avoid the use of open-source software in our products, services and technologies, and otherwise only use open source software available under permissive open source licenses, it is possible that other manners of use, including those that a third party may allege to be in breach of a corresponding open source license, may have inadvertently occurred in deploying our products, services and technologies. If a third party software provider has incorporated certain types of open-source software into software we license from such third party for our products, services and technologies without our knowledge, we could be required to disclose the source code to our products, services and technologies. This could harm our intellectual property position as well as our business prospects, operating results and financial condition.

A variety of new and existing laws and/or interpretations could materially and adversely affect our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including laws and regulations related to: privacy, data protection, security, retention and deletion; rights of publicity; content; intellectual property; regulation of certain of our CEDs as firearms; advertising; marketing; distribution; electronic contracts and other communications; competition; consumer protection; telecommunications; product liability; taxation; labor and employment; sustainability; economic or other trade prohibitions or sanctions; securities; and online payment services. The introduction of new products and expansion of our activities in certain jurisdictions, including through acquisitions, and other actions that we may take, may subject us to additional laws, regulations or other government scrutiny. There are several legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas affecting our business. In addition, foreign privacy, data protection, content, competition, sustainability and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. New laws and regulations (or new interpretations of existing laws and regulations) could materially and adversely affect our business.

The cost of compliance with these laws and regulations is high and is likely to increase in the future. Additionally, these laws and regulations, or any associated inquiries or investigations or other government actions, have in the past and may in the future delay or impede the development of new products, result in negative publicity, cause customers to delay purchases, require significant management time and attention, cause us to change our business practices, and subject us to remedies that may harm our business, including civil or criminal liability, such as fines, demands or orders that we modify or cease existing business practices. For additional details, refer to “Item 1. Business – Governmental Regulation” in this Annual Report on Form 10-K for the year ended December 31, 2025.

Uncertainties with complex U.S. federal, state and local and foreign procurement laws and regulations of governments could cause us to incur costs, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

We have entered and will enter into contracts with U.S. federal, state and local governments and foreign governments. This subjects us to various statutes and regulations applicable to companies doing business with governments, including the Federal Acquisition Regulation (“FAR”). We must comply with laws and regulations relating to the formation, administration and performance of U.S. federal, state and local and foreign government contracts. These laws and regulations govern how we conduct business with government customers.

Recently issued executive orders are intended to (i) simplify and accelerate the procurement process through a review and restructuring of the FAR, and its supplements and (ii) modernize defense acquisitions by promoting commercial solutions, innovative acquisition authorities, and other existing streamlined processes. Among the actions directed is a review of major defense acquisition programs that are more than 15% behind schedule or over budget, including identifying any programs for potential cancellation. Should the U.S. government review one or more major defense programs in which we provide products and/or services, and such review leads to a full or partial cancellation of one of these programs, it could have an adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to evolving corporate governance and public disclosure regulations and expectations that could expose us to numerous risks.

We are subject to changing rules and regulations promulgated by several governmental and self-regulatory organizations, including the SEC, the Nasdaq Stock Market and the FASB. These rules and regulations continue to evolve in scope and complexity with many new requirements arising from laws enacted by Congress, making compliance more difficult and uncertain. In addition, certain regulators, customers, investors, employees and other stakeholders are focusing on environmental, social and governance (“ESG”) matters and related disclosures, while other ESG-related practices have also been increasingly subject to political controversy in the United States. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time-consuming and is subject to evolving reporting standards, including the UK Modern Slavery Act and the European Union’s Corporate Sustainability Reporting Directive.

Additionally, unfavorable perception regarding our social initiatives, governance practices, diversity initiatives, the perceived or actual impacts of our products and services, environmental policies or other concerns of our stakeholders (which could conflict with the expectations of other stakeholders) could adversely affect our reputation. Any negative effect on our reputation could have an adverse effect on the size of our customer base, which could adversely affect our business and financial results. We have been, and may be in the future, subject to informal private or public inquiries and formal proxy proposals by activists urging us to take certain corporate actions related to ESG matters, which may not be aligned with our best interests. These activities may adversely affect our business in a number of ways, since responding to inquiries or proposals can be costly, time-consuming, and disruptive to our operations and could meaningfully divert our resources, including the attention of our management team and our employees.

We may also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible sourcing and social investments and other ESG-related matters, in our SEC filings or in other public disclosures. These initiatives and goals may be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals or for any revisions to these goals. Given the dynamic nature of ESG expectations, standards and regulations, which may change over time, we may from time to time need to update or otherwise revise our current practices, initiatives and goals, including in response to legislative or legal developments. If our ESG-related data, processes and reporting attract controversy, if such data, processes or reporting are or are perceived to be incomplete or inaccurate, or if we fail to progress towards our ESG-related goals on a timely basis, or at all, we may be exposed to potential liability or litigation, and our reputation, business, financial performance and growth could be adversely affected.

Our amended and restated bylaws include exclusive forum provisions that could increase costs to bring a claim, discourage claims or limit the ability of our shareholders to bring a claim in a judicial forum viewed by shareholders as more favorable for disputes.

Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Chancery Court of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or shareholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or of our certificate of incorporation or our bylaws; or (iv) any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine. In addition, our bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claim arising under the Securities Act. The exclusive forum provision in our bylaws does not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

The choice of forum provision may increase costs to bring a claim, discourage claims or limit a shareholder’s ability to bring a claim in a judicial forum viewed by the shareholder as more favorable for disputes with Axon or Axon’s directors, officers or other employees, which may discourage such lawsuits against Axon or Axon’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Risks Related to our Indebtedness

Fulfilling our debt obligations requires significant cash resources, which may exceed our available cash flow.

Our ability to meet our debt obligations, including making, scheduled principal and interest payments or refinancing obligations, depends on our future performance and external factors beyond our control. If our business fails to generate sufficient cash flow from operations to meet these obligations and fund capital expenditures, we may be required to adopt alternatives (for example, asset sales, debt restructuring or equity financing) that may be on unfavorable or dilutive terms. Further, our ability to refinance our indebtedness will depend on market conditions and our financial standing at such time, which may be unfavorable. If we are unable to identify or pursue acceptable alternatives on commercially reasonable terms, we could be unable to meet our debt obligations, which could result in a default.

The 2027 Note Hedge and Warrant transactions may impact the value of our common stock.

In connection with the pricing of the 2027 Notes, we entered into 2027 Note Hedge transactions and Warrant transactions with the option counterparties. The 2027 Note Hedge transactions were intended to reduce the potential dilution to our common stock upon any conversion of the 2027 Notes and offset any cash payments we are required to make in excess of the principal amount of converted Notes. We entered into agreements with the counterparties to our 2027 Note Hedge transactions in March 2025 to leave the 2027 Note Hedge transactions outstanding until the original maturity of the 2027 Notes in respect of the 2027 Notes we exchanged in March 2025. Further, we unwound a portion of the Note Hedge and Warrant transactions corresponding to the principal amount of the 2027 Notes that we exchanged in December 2025. As of the date of filing this Annual Report on Form 10-K, a portion of the 2027 Note Hedge and Warrant transactions were still outstanding, notwithstanding the extinguishment of our 2027 Notes. As a result, the Warrant transactions could have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the Warrants.

Additionally, the option counterparties or their affiliates may adjust their hedge positions by entering into or unwinding various derivatives linked to our common stock, or by buying or selling our common stock or other securities in secondary market transactions. Such actions could cause fluctuations in the market price of our common stock, potentially causing it to rise or fall.

If any of the 2027 Note Hedge or Warrant transactions do not perform as anticipated, counterparties may unwind their positions, which could adversely affect our stock price.

The effect of these transactions and related activities on the market price of our common stock will depend in part on market conditions and other factors beyond our control, and their impact cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.

We are exposed to counterparty risk with respect to the 2027 Note Hedge transactions.

The option counterparties for the 2027 Note Hedge transactions are financial institutions, and we face the risk that any or all of them might default on their obligations under these transactions. Our exposure to this credit risk is unsecure, as the option counterparties have not secured their obligations by any collateral.

If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure under the 2027 Note Hedge transactions at that time. Our exposure will depend on many factors, including an increase in the market price and volatility of our common stock. A counterparty default could also have tax consequences and could increase dilution relative to our current expectations. We cannot provide assurances as to the financial stability or solvency of the option counterparties, and any default could materially and adversely affect our financial results.

Our indebtedness contains restrictive covenants that could limit our operational flexibility and adversely affect the value of our common stock.

Our revolving credit facility, and the indentures governing our 2030 Notes and 2033 Notes (collectively, the “Notes”) impose certain restrictions on our ability to, among other matters, incur additional debt and liens, make distributions to our shareholders in certain circumstances, dispose of assets and enter into mergers, consolidations and transfers of all or substantially all of our assets. In addition, the revolving credit facility requires us to maintain specified financial ratios and satisfy other financial condition tests. Further, following certain change of control events, we would be required to offer to repurchase the Notes, and such events would also constitute an event of default under our revolving credit facility.

These limitations may restrict our ability to operate our business, pursue strategic transactions, or otherwise respond to changing business or economic conditions. Consequently, compliance with these covenants could adversely affect our business and the value of our common stock.

Cybersecurity Risk Management and Strategy

Our business depends on the secure and reliable operation of our information systems, which support operations, communications, supply chain management, billing, accounting, and other critical functions. We collect, process, store, and transmit personally identifiable and other sensitive information relating to employees, customers, third parties, and, in certain cases, subjects of law enforcement, and must protect its confidentiality, integrity, and availability.

We maintain a formal cybersecurity and information security program that incorporates recommendations from recognized frameworks and standards, including ISO, SOC 2, CJIS, FedRAMP, and NIST. The Information Security team oversees the program, which is designed to identify, prevent, detect, respond to, and remediate cybersecurity vulnerabilities and incidents.

To manage cybersecurity risk and support regulatory compliance and system availability, we undertake activities including monitoring evolving data protection laws; maintaining internal and customer-facing policies; providing regular employee training, including phishing simulations; requiring employees and service providers to safeguard data; conducting risk-based diligence and oversight of third-party vendors; performing periodic risk assessments, vulnerability scans, penetration testing, and tabletop exercises; updating security technologies; and maintaining cybersecurity insurance coverage.

Third Party Monitoring and External Reviews

We engage third-party technology providers to support the protection of our information systems and networks. These services include vulnerability assessments, incident response support such as computer forensics, internal and external audits for security certifications, and broader evaluations of program maturity. Material findings, significant control weaknesses, and key recommendations arising from these activities are reported to the Enterprise Risk and Compliance Committee of the Board of Directors of the Company (“ERC Committee”).

Cybersecurity Management Team

The Company's cybersecurity and information security program, including data privacy, is led by the Chief Information Security Officer (“CISO”), who oversees the Company's global information security function. The current CISO has more than 20 years of experience in information technology and information security, including leadership roles at Netflix, Salesforce, and Facebook, and has served as the Company's CISO since February 2024. He holds a Master of Science in Information Assurance and relevant industry certifications.

The CISO attends quarterly meetings of the Disclosure Committee and the ERC Committee and provides updates regarding the Company’s cybersecurity risk profile, program maturity, significant developments, and related disclosures included in the Company’s filings with the SEC.

The CISO, together with the Information Security team, leads the Security Incident Response Team, which investigates suspected cybersecurity threats and incidents. In the event of a potentially material cybersecurity incident, senior leadership, including the Chief Legal Officer, Chief Accounting Officer, Chief Operating Officer, Chief Financial Officer, and other appropriate members of management, participate in the response and assessment process.

Board Oversight

The Board of Directors oversees data and systems protection, including cybersecurity risk. The Audit Committee reviews significant legal, compliance, or regulatory matters that may materially impact the Company and consults with the ERC Committee on matters involving cybersecurity, data privacy, or information technology. The Chair of the ERC Committee also serves on the Audit Committee, facilitating coordination between the committees.

The ERC Committee oversees the Company’s enterprise risk management framework, including cybersecurity risk. The Information Security team and CISO report to the ERC Committee at least quarterly regarding cybersecurity risks, emerging threats, and the status of the Company’s cybersecurity program. The ERC Committee provides updates to the Board of Directors.

Incident Response and Assessment Policies and Procedures

The Company maintains an incident response plan that establishes defined roles and responsibilities and includes disclosure controls and procedures for assessing the materiality of cybersecurity events.

In the event of a potentially material cybersecurity incident, the Security Incident Response Team, under the direction of the Chief Legal Officer, evaluates relevant quantitative and qualitative factors, including incidents affecting third-party systems. The Team reports its findings to the Chair of the ERC Committee. If further review is warranted, the Audit Committee is convened, with members of the ERC Committee invited, to determine materiality consistent with SEC guidance. Incidents determined not to be material are reported to the ERC Committee at its next scheduled meeting.

To date, the Company has not identified risks from known cybersecurity threats, including prior incidents, that have materially affected its operations, business strategy, results of operations, or financial condition. The Company faces ongoing cybersecurity risks that, if realized, could materially affect the Company. Additional information is provided in Item 1A of Part I of this Annual Report on Form 10-K.

Our primary corporate headquarters are spread across seven facilities and approximately 900,000 square feet in the Phoenix, Arizona metropolitan area. We have more than 30 leased locations spread across nine states domestically and over 15 countries internationally. These locations include manufacturing and research space, as well as sales and administrative offices. Our largest manufacturing and research spaces are located in Arizona, while our largest sales and administrative offices are located in Arizona, Washington, and Massachusetts. Because Axon is a global enterprise with substantial inter-segment cooperation, the majority of our locations support both of our reportable segments.

We believe our existing facilities are well maintained and in good operating condition. We also believe we have adequate manufacturing capacity for our existing product lines. To the extent that we continue to grow and introduce new products in the future, we will need to acquire additional facilities to locate the associated production lines. However, we believe we can acquire or lease such facilities on reasonable terms. We continue to make investments in capital equipment as needed to meet anticipated demand for our products.

See discussion of litigation in Note 11 included in Part II, Item 8 of this Annual Report on Form 10-K, which discussion is incorporated by reference herein.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K. 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 Annual Report on Form 10-K. The various sections of our MD&A contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing.

MD&A discusses our results of operations for the year ended December 31, 2025 as compared to the year ended December 31, 2024. For discussion of the year ended December 31, 2024 as compared to the year ended December 31, 2023, refer to MD&A included in Part II, Item 7 of 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.

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 AI.

During the year ended December 31, 2025, we realigned our business into two reportable segments, Connected Devices and Software and Services (the “Segment Realignment”). As a result of the Segment Realignment, we have recast our segment and other relevant disclosures for the year ended December 31, 2024 to conform to the new presentation.

Our revenues for the year ended December 31, 2025 were $2.8 billion, an increase of $697.0 million, or 33.5%, from the year ended December 31, 2024. We had loss from operations of $62.1 million for the year ended December 31, 2025, compared to income from operations of $58.5 million for the same period in the prior year. Gross margin dollars increased $416.7 million and increased as a percentage of revenue to 59.7% from 59.6% compared to the year ended December 31, 2024. Adjusted gross margin decreased to 62.6% for the year ended December 31, 2025 compared to 63.2% for the year ended December 31, 2024. The decrease was primarily driven by global tariffs and a higher mix of Platform Solutions revenue. Operating expenses increased by $537.4 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $124.7 million included net realized and unrealized gains of $186.4 million related to our strategic investments and a $105.7 million tax benefit, partially offset by a net realized and unrealized loss of $46.4 million related to our marketable securities, inducement expense of $38.9 million associated with the early repurchase of a portion of our 2027 Notes, and interest loss, net of $18.8 million. Net income of $377.0 million for the year ended December 31, 2024 included net realized and unrealized gains of $162.9 million related to our strategic investments, a net unrealized gain of $120.3 million related to our marketable securities, and interest income, net of $36.6 million.

Results of Operations

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):

The following table presents our revenues disaggregated by geography (dollars in thousands):

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

Net Sales

Net sales by product line were as follows (dollars in thousands):

(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 29.1% for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase of $163.7 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $80.1 million, which was primarily driven by the continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $111.7 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment, virtual reality training, and fleet systems.

Net sales for the Software and Services segment increased 39.6% for the year ended December 31, 2025 as compared to the year ended December 31, 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 $341.4 million.

Gross Margin

As a percentage of net sales, gross margin for the Connected Devices segment decreased to 48.7% from 49.4% for the years ended December 31, 2025 and 2024, respectively. Adjusted gross margin for the Connected Devices segment was 51.2% for the year ended December 31, 2025, compared to 53.6% for the year ended December 31, 2024. The decrease in gross margin and adjusted gross margin is primarily driven by higher mix of Platform Solutions revenue and global tariffs.

As a percentage of net sales, gross margin for the Software and Services segment decreased to 74.0% from 74.1% for the years ended December 31, 2025 and 2024, respectively. The decrease was primarily driven by higher stock-based compensation expense and acquired intangibles amortization. Adjusted gross margin for the Software and Services segment increased to 77.5% for the year ended December 31, 2025, compared to 76.8% for the year ended December 31, 2024. The increase was primarily driven by higher software mix.

Selling, General and Administrative Expenses

SG&A expenses (dollars in thousands):

We incurred non-recurring severance costs during the three months ended December 31, 2025 of $28.7 million, which consisted of stock-based compensation, cash payments and employee benefits.

Stock-based compensation expense, excluding the impact of non-recurring severance costs, increased $127.8 million in comparison to the prior year December 31, 2024 comparable period, which was primarily related to an increase in headcount and a full year of expense recognized in the current year for grants of Employee XSP and the CEO Performance Award (as defined below), compared to a partial year of expense recognized in the prior year.

Salaries, benefits and bonus expense, excluding the impact of non-recurring severance costs, increased $73.2 million in comparison to the prior year December 31, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Sales and marketing expense increased $17.5 million in comparison to the prior year December 31, 2024 comparable period, which was primarily attributable to increased commissions.

Other SG&A expenses increased $47.4 million in comparison to the prior year, partially driven by $11.9 million in increased travel expenses. Further increases were driven by litigation and regulatory costs, as well as professional and consulting costs.

Research and Development Expenses

R&D expenses (dollars in thousands):

We incurred non-recurring severance costs during the three months ended December 31, 2025 of $1.1 million, which consisted of stock-based compensation, cash payments and employee benefits.

Stock-based compensation expense, excluding the impact of non-recurring severance costs, increased $106.6 million in comparison to the prior year December 31, 2024, which was primarily related to an increase in headcount and a full year of expense recognized in the current year for grants of Employee XSP and the CEO Performance Award (as defined below), compared to a partial year of expense recognized in the prior year.

Salaries, benefits, and bonus expense, excluding the impact of non-recurring severance costs, increased $78.7 million in comparison to the prior-year December 31, 2024, which was primarily attributable to an increase in headcount and higher wages.

Other R&D expenses increased $56.3 million in comparison to the prior year December 31, 2024, partially driven by an increase in professional and consulting expenses of $24.9 million related to the development of new products.

Interest Income (Loss), Net

Interest income (loss), net, was as follows (in thousands):

(1) Interest income increased in comparison to the year ended December 31, 2024 comparable period primarily as a result of higher balances of available-for-sale securities during the year.

(2) Interest expense increased in comparison to the year ended December 31, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.

Other Income, Net

Other income, net, was as follows (in thousands):

(1) Reflects the net realized and unrealized gain associated with our strategic investments during the years ended December 31, 2025 and December 31, 2024, as discussed within Note 7.

(2) Reflects the net realized and unrealized gain (loss) on marketable securities during the years ended December 31, 2025 and December 31, 2024, as discussed within Note 3.

(3) Reflects the inducement expense associated with the early repurchase of a portion of our 2027 Notes in both the first and fourth quarters of 2025, as discussed further within Note 10.

Provision for Income Taxes

The effective tax rate was (557.0)% for the year ended December 31, 2025, compared to 1.2% for the year ended December 31, 2024. The change is primarily attributable to the net tax benefit related to stock-based compensation and R&D tax credits, 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 adjustments.

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

Net Income

We recorded net income of $124.7 million for the year ended December 31, 2025 compared to net income of $377.0 million for the year ended December 31, 2024. Net income per basic share was $1.60 and diluted net income per share was $1.51 for the year ended December 31, 2025, compared to net income per basic share of $4.98 and diluted net income per share of $4.80 for the year ended December 31, 2024.

The reduction in net income when compared to the prior period is partially driven by a loss from operations of $62.1 million for the year ended December 31, 2025 compared to income from operations of $58.5 million for the year ended December 31, 2024. This loss from operations was primarily driven by stock-based compensation expense and increased headcount to support business growth. Further drivers of the reduction in net income include our net realized and unrealized loss of $46.4 million related to our marketable securities, inducement expense of $38.9 million associated with the early repurchase of a portion of our 2027 Notes, and interest loss, net of $18.8 million, among other items.

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, including stock-based compensation expense and amortization of acquired intangible assets. To improve comparability, prior periods have been conformed to the current period presentation. Our management uses these non-GAAP financial measures in evaluating our operating performance in comparison to prior periods. 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.

• 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; 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; non-recurring severance costs, including employee cash payments, equity, and related benefits; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; payroll taxes related to Employee XSP vesting and 2018 CEO Performance Award option exercises; 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; and inventory step-up amortization related to acquisitions.
• Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross margin before noncash stock-based compensation expense; amortization of acquired intangible assets; non-recurring severance costs, including employee cash payments, equity, and related benefits; payroll taxes related to Employee XSP vesting; 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 2025 Annual Report on Form 10-K were prepared under a comprehensive set of rules or principles.

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

(1) For the year ended December 31, 2025, non-recurring severance costs of $31.8 million consisted of stock-based compensation, cash payments and employee benefits.

As a result of the Segment Realignment, we have recast adjusted gross margin for the year ended December 31, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):

(1) For the year ended December 31, 2025, non-recurring severance costs recorded to cost of service and product sales of $2.0 million consisted of stock-based compensation expense, cash payments and employee benefits.

Liquidity and Capital Resources

Summary

Our most significant source of liquidity continues to be funds generated by operating activities and available cash and cash equivalents and short-term investments. As of the year ended December 31, 2025, we had $1.2 billion of cash and cash equivalents, an increase of $746.3 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of December 31, 2025, we had $505.4 million of available-for-sale investments, an increase of $172.2 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 II, Item 8 of this Annual Report on Form 10-K for additional details on the issuance.

In addition, our revolving credit facility (the “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 December 31, 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 December 31, 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 II, Item 8 of this Annual Report on Form 10-K for additional details.

Furthermore, during the year ended December 31, 2025, we sold approximately 0.7 million shares of our common stock under our ATM. We generated approximately $494.7 million in aggregate gross proceeds from sales under an “at-the-market” equity offering program (the “ATM”). We recorded aggregate net proceeds of $489.4 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $5.3 million. Refer to Note 14 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

As of December 31, 2025, we had an aggregate of $1.75 billion of Senior Notes outstanding. None of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 15% of our total revenue for the year ended December 31, 2025, and approximately 20% and 7% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of December 31, 2025. Refer to Note 10 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

In addition, we had approximately $81.1 million aggregate principal amount of 2027 Notes outstanding as of December 31, 2025. Subsequent to the year ended December 31, 2025, 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, in each case, pursuant to a notice of redemption delivered on December 18, 2025 and the terms of the indenture governing the 2027 Notes. As a result, we have no 2027 Notes outstanding following settlement of the aforementioned redemption. Refer to Note 10 and Note 20 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

Subsequent to the year ended December 31, 2025, we acquired Carbyne Ltd., (“Carbyne”) a leading cloud-native emergency communications and response platform for a base purchase price of $625.0 million, subject to customary purchase price and working capital adjustments. We funded this transaction using our available cash on-hand. Refer to Note 20 in Part II, Item 8 of this Annual Report on Form 10-K 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. We and our Board of Directors may consider repurchases of our common stock. Further, repurchases of our common stock would take place on the open market, would be financed with available cash and are subject to authorization as well as market and business conditions.

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.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities (in thousands):

Operating activities

Net cash provided by operating activities was $211.3 million for the year ended December 31, 2025 compared to net cash provided by operating activities of $408.3 million for the year ended December 31, 2024. The net operating cash outflow for the year ended December 31, 2025 includes net income of $124.7 million, a net add-back of non-cash income statement items of $568.4 million and a $481.7 million net change in operating assets and liabilities.

Primary drivers of the non-cash items include $634.2 million of stock-based compensation expense for employee equity programs, $83.2 million of depreciation and amortization and $38.9 million of debt inducement expense related to the induced conversion for our 2027 Notes, partially offset by $140.0 million in fair value adjustments for net realized and unrealized gains and losses on our strategic investments and marketable securities and $82.7 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, with additional deferred tax assets generated from R&D credit carryforwards and net operating losses, both driven by stock-based compensation windfall and changes as a result of the One Big Beautiful Bill Act which was signed into law on July 4, 2025.

The change in operating assets and liabilities includes $505.6 million of receivables and contract assets primarily driven by increased sales and the timing of invoicing and cash collections, $204.9 million of inventory and accounts payable primarily driven by advanced raw material purchases for Axon Body 4 and TASER 10 CEDs to support future sales, third party product costs and future interest payments on our Senior Notes, $264.6 million of prepaid expenses and other assets primarily driven by supplier prepayments, receivables for income tax, and commissions as bookings continue to grow, and $83.5 million of deferred revenue.

Investing activities

Net cash used in investing activities was $724.9 million for the year ended December 31, 2025 compared to $490.6 million for the year ended December 31, 2024. The net investing cash outflow is primarily driven by $2.1 billion of investment purchases which include $1.8 billion for short-term investments and $279.6 million for strategic investments, $646.9 million related to business combinations and $136.3 million for purchases of property and equipment. The cash outflow was partially offset by $1.8 billion of proceeds from calls, maturities and sales of available-for-sale and marketable securities investments and $376.9 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.

Financing activities

Net cash provided by financing activities was $1.3 billion for the year ended December 31, 2025 compared to cash used in financing activities of $45.4 million for the year ended December 31, 2024. The financing cash inflow was primarily driven by gross proceeds of $1.8 billion from the Senior Notes issuance and net proceeds of $489.6 million from our ATM equity offering program. The proceeds were partially offset by $608.9 million of principal payments related to the conversions for our 2027 Notes, $27.0 million of transaction costs related to the induced conversions, debt issuance, and revolver modifications, and cash payments totaling $351.0 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 2 of the Employee XSP program, of which $0.9 million remains unpaid as of the year ended December 31, 2025.

Contractual Obligations

The following table outlines our future contractual financial obligations, as of December 31, 2025 (in thousands):

(1) The 2027 Notes are contractually due on a long-term basis. However, as of December 31, 2025, the Notes were convertible at the option of the holders. Furthermore, subsequent to the year ended December 31, 2025, we redeemed and converted all of the outstanding 2027 Notes on February 10, 2026, and February 11, 2026, respectively, and we have no 2027 Notes outstanding. Therefore, the Notes were classified as current liabilities within our consolidated balance sheet as of December 31, 2025 and have been presented within short-term above. Refer to Note 10 and Note 20 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

Operating lease obligations include operating leases for office space, manufacturing and logistical functions, discussed further within Note 16 in Part II, Item 8 of this Annual Report on Form 10-K, as well as legally binding minimum lease payments for leases signed but not yet commenced totaling $3.2 million. We regularly evaluate our real estate needs to identify opportunities to reduce long-term cash requirements where practicable.

Purchase obligations include both open purchase orders and other purchase commitments, discussed further within Note 11 in Part II, Item 8 of this Annual Report on Form 10-K. Open purchase orders represent both cancellable and non-cancellable purchase orders with key vendors, which are included in this table due to our strategic relationships with these vendors.

Subsequent to the year ended December 31, 2025, we redeemed and converted all of our outstanding 2027 Notes on February 10, 2026, and February 11, 2026, respectively, and in each case, pursuant to a notice of redemption delivered on December 18, 2025, and the terms of the indenture governing the 2027 Notes. Refer to Note 10 and Note 20 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

In March 2025, we issued $1.0 billion aggregate principal amount of Senior Notes due 2030 (the “2030 Notes”) and $750.0 million aggregate principal amount of Senior Notes due 2033 (the “2033 Notes”). Refer to Note 10 in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

Obligations related to our uncertain tax positions have been excluded from the table above because of the uncertainty surrounding the timing and final amounts of any settlement. For additional details, refer to Note 12 in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Estimates

We have identified the following accounting estimates as critical to our business operations and the understanding of our results of operations. The preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. While we do not believe that a significant change in these estimates is reasonably likely, there can be no assurance that our actual results will not differ from these estimates.

Inventory

Inventories are stated at lower of cost and net realizable value, using a standard cost method which approximates the first-in, first-out method. Additional provisions are made to reduce excess, obsolete or slow-moving inventories to their net realizable value. These provisions are based on our best estimate after considering historical demand, projected future demand, inventory purchase commitments, industry and market trends, and a variety of other factors. Changes in these underlying assumptions can materially affect our provisions and the resulting net realizable value of our inventories. For additional discussion, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.

Revenue Recognition

We apply the five-step model outlined in ASC 606, as discussed further in Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our estimate of the standalone selling price (“SSP”) of each distinct good or service in the contract. Revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. For additional discussion, refer to Note 2 in Part II, Item 8 of this Annual Report on Form 10-K.

We determine the term of our arrangements based on identifying the contract with the customer. In certain of our arrangements, the customer may have termination rights. In these instances, we determine if there is a substantive penalty. For contracts with a substantive penalty, the accounting term will be the legal contract term, inclusive of the periods for which the customer termination rights exist. In these contracts with no substantive penalty, we also consider if the option for our customer to purchase additional goods or services represents an additional performance obligation in the form of a material right.

The timing of revenue recognition may differ from the timing of invoicing to customers. We generally have an unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. For additional discussion, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.

Valuation of Goodwill, Intangible and Long-lived Assets

We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets and identifiable intangible assets, excluding goodwill and intangible assets with indefinite useful lives, may warrant revision or that the remaining balance of these assets may not be recoverable. Such circumstances could include a change in the product mix, a change in the way products are created, produced or delivered, or a significant change in the way products are branded and marketed. In performing the review for recoverability, we estimate the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The amount of the impairment loss, if impairment exists, is calculated based on the excess of the carrying amounts of the assets over their estimated fair values computed using discounted cash flows. As such, the key inputs into this analysis are inherently subject to uncertainty and require significant judgments to be made.

Finite-lived intangible assets and other long-lived assets are amortized over their estimated useful lives. We do not amortize goodwill and intangible assets with indefinite useful lives; rather such assets are tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. In performing our annual impairment assessments for goodwill and indefinite-lived intangible assets, we consider a variety of factors including (1) events impacting the carrying value or composition of a reporting unit or asset group, respectively, (2) changes in the macroeconomic environment, (3) adverse changes in our financial performance, (4) industry and market conditions, among others. Any significant changes in these underlying assumptions may significantly affect our impairment conclusions and net book value of corresponding assets in our consolidated financial statements. Based on our annual impairment assessments, no goodwill or indefinite-lived intangible asset impairment was indicated. For additional details, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.

Income Taxes

We recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. We also recognize federal, state and foreign deferred tax assets or liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carry forwards.

Our calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of current and deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting or tax laws domestically and internationally, or changes in other facts or circumstances.

Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In evaluating our ability to recover our deferred income tax assets, we consider all available positive and negative evidence, including our operating results, the future reversals of deferred tax liabilities, forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income can affect the realization of net deferred tax assets. We exercise significant judgment in determining our provision for income taxes, our deferred income tax assets and liabilities, and our future taxable income for purposes of assessing our ability to utilize any future tax benefit from our deferred income tax assets.

We operate in multiple tax jurisdictions and are subject to audit in these jurisdictions, generally years after our returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. We record uncertain tax positions when it has been determined that it is more-likely-than-not that a tax position will not be sustained upon examination by taxing authorities based on the technical merits of the position. We use the criteria established in the accounting guidance to determine whether an item meets the definition of more-likely-than-not. The Company’s policy is to recognize these uncertain tax positions when the more-likely than-not threshold is met, when the statute of limitations has expired or upon settlement. Changes in assessments may result in income tax benefit or additional expense in our consolidated financial statements. For additional details, refer to Note 12 in Part II, Item 8 of this Annual Report on Form 10-K.

Stock-Based Compensation

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, each of which is discussed further in Note 1 in Part II, Item 8 of this Annual Report.

Compensation expense for performance awards is recognized based on our best estimate of the probability of the performance criteria being satisfied using the most currently available projections, adjusted at each balance sheet date. Stock-based compensation expense associated with XSUs is recognized over the requisite service period, which is considered the longest explicit, implicit or derived service period for each respective tranche. We utilized Monte Carlo simulations to evaluate a range of possible future stock price goals over the term of the awards at each of the respective grant dates, the median of which was used as the basis for the derived service period for each tranche. Furthermore, we measured the grant date fair value of each tranche utilizing a Monte Carlo simulation which considered various assumptions, including expected volatility and an illiquidity discount. This simulation is based on a subjective assessment of our forward-looking financial projections, taking into consideration statistical analysis. There is significant judgment required to determine the requisite service period, grant date fair value, and probability of the performance criteria being satisfied. Changes in the subjective and probability-based assumptions can materially affect the estimates of the fair value of the awards and timing of recognition of stock-based compensation and consequently, the related amount recognized in our consolidated statements of operations and comprehensive income. For additional details, refer to Note 1 and Note 14 in Part II, Item 8 of this Annual Report on Form 10-K.

Contingencies and Accrued Litigation Expense

We are subject to the possibility of various loss contingencies arising in the ordinary course of business, including product-related and other litigation. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required. We do not believe any currently identified claims or litigation will materially affect our financial condition, results of operations or cash flows. However, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, it may cause a material adverse impact on the financial condition, results of operations or cash flows for the period in which the ruling occurs, or future periods. For additional details, refer to Note 11 in Part II, Item 8 of this Annual Report on Form 10-K.

Strategic Investments

Our strategic investments are generally accounted for under the ASC 321 measurement alternative for equity securities without readily determinable fair values. Accordingly, the equity investments will be carried at cost less impairment. These investments are subsequently remeasured to fair value upon observable price changes in an orderly transaction for the identical or similar investments. Additionally, if a qualitative assessment identifies impairment indicators, then the equity investments must be evaluated for impairment and written down to fair value in the event carrying value exceeds fair value. For additional details relating to our valuation techniques, refer to Note 1 and Note 7 in Part II, Item 8 of this Annual Report on Form 10-K.

Business Combinations

When we acquire a business, we allocate the purchase consideration to the liabilities assumed, intangible assets and other assets acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Additionally, in step acquisitions in which we acquire incremental equity interests that provide us control of a business, the previously held equity interest is remeasured to fair value at the date the controlling interest is acquired.

Critical estimates used in valuing certain acquired intangible assets include, but are not limited to, significant assumptions with respect to time and resources required to recreate the assets acquired, actual and forecasted cash flows, long-term growth rates, market royalty rates, and discount rates associated, amongst other factors. The values and estimated useful lives assigned to intangible assets acquired in business combinations impact the amount and timing of future amortization expense. Remeasurement of previously held equity interests to fair value is also dependent on these estimates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may vary. For additional details, refer to Note 19 in Part II, Item 8 of this Annual Report on Form 10-K.

Interest Rate Risk

We typically invest in a limited number of financial instruments, consisting principally of investments in 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”. To quantify our interest rate risk exposure, we perform a sensitivity analysis based on hypothetical changes in interest rates. Based on investment positions as of December 31, 2025, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $0.2 million decline in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.

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 $8.9 million at December 31, 2025. As of the year ended December 31, 2025, there was no amount outstanding under the line of credit, and the available borrowing under the line of credit was $291.1 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.

Attached as exhibits to this Annual Report on Form 10-K are certifications of the Chief Executive Officer (as the principal executive officer) and Chief Financial Officer (as the principal financial and accounting officer), which are required in accordance with Rule 13a-14 of the Exchange Act. This section includes information concerning the controls and controls evaluations referred to in the certifications. This section should be read in conjunction with the certifications for a more complete understanding of the topics presented. PricewaterhouseCoopers LLP has independently audited the effectiveness of our internal control over financial reporting as of December 31, 2025 and its report is included in Item 8 of this Annual Report.

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 December 31, 2025, the end of the period covered by this Annual Report on Form 10-K. 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, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is 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 this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2025, as a result of the material weakness in internal control over financial reporting discussed below.

Notwithstanding the material weakness, and based on the additional analyses and other procedures management performed to ensure that its consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S. GAAP, we have concluded that the consolidated financial statements fairly present in all material respects our financial condition, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the U.S.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the Company's internal control over financial reporting was not effective as of December 31, 2025 as a result of the material weakness described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The Company did not design and maintain effective controls related to revenue recognition for its 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 U.S. GAAP. This material weakness resulted in immaterial errors related to revenue, related contract assets and liabilities, and the remaining performance obligations disclosure as of and for each of the interim and annual periods during 2023 and 2024. Additionally, the material weakness could result in a misstatement of the aforementioned accounts and disclosure that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025 as stated in their report which appears in Item 8 of this Annual Report.

Remediation Efforts to Address the Material Weakness

We are committed to maintaining strong internal control over financial reporting. In relation to the material weakness, management, with oversight from the Company’s Audit Committee, continued to execute the remediation plan as disclosed in Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A. During the fourth quarter of 2025, we 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.

We expect to conclude that the material weakness is remediated once we determine that the applicable controls have operated effectively for a sufficient period of time.

Changes in Internal Control over Financial Reporting

The remediation efforts described above are changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.