Axon Invests About $1.2 Billion in Skydio, Cuts 2026 Revenue Growth Forecast to 30%

Key Facts

On November 5, Axon announced an investment of about $1.2 billion in Skydio, while lowering its forecast for 2026 revenue growth to about 30% from a previous range of 32% to 34%. The company said the investment combines cash and Axon shares, and includes both new funding for Skydio and purchases of shares from existing shareholders. The deal raises Axon’s fully diluted stake in the company to 37%, according to its statement. Axon will also become the exclusive distributor of Skydio products for the public-safety sector in the United States and Canada. The announcement puts the drone partnership at the forefront of the company’s strategy, while the reduced guidance reflects the effect of delays to specific federal deployments on revenue expected this year.

Axon said the investment adds about 20 percentage points to its fully diluted stake in Skydio, based on a pre-investment valuation of $5.2 billion. The amount consists of funding for the company and purchases of existing shares, so the entire investment does not go to Skydio as new funding. Axon expects the deal to strengthen Skydio’s capabilities, accelerate innovation and expand its products. The exclusive distribution arrangement gives Axon a direct role in marketing Skydio products to public agencies in the U.S. and Canadian markets. The company estimates the addressable market for drone-as-first-responder services in the two countries at about $13 billion, while Skydio expects bookings of about $1 billion in its current fiscal year.

Skydio serves more than 1,500 public-safety agencies, according to Axon, while more than 28 million Americans live within two miles of a takeoff-and-landing platform operated by a drone-as-first-responder program. The company said priority response times among agencies using the service have fallen by as much as 65%. It added that drones arrive before officers in about 80% of the calls in which they are deployed. These metrics reflect the scale of use underpinning Axon’s market estimate and distribution expansion. But the company did not directly link these measures to its revised financial forecast for the year.

Axon attributed the guidance cut to removing three federal deployments of its Dedrone system, which it had expected to contribute about $130 million in revenue in 2026. The company said that revenue is no longer expected during the year, as the deployments remain outside the timeline assumed in its previous forecast. Had the three deployments remained on their previous schedule, annual revenue growth would have been about 500 basis points above current guidance and about 200 basis points above the midpoint of the previous guidance range. Axon forecast annual revenue of between $3.61 billion and $3.63 billion, equivalent to growth of about 30%. This identifies the reason for the revision as the timing of large federal contracts, rather than an announced retreat from the goal of the Skydio partnership.

The revision came after Axon reported record third-quarter revenue of $909 million, up 28% year over year, and net income of $57 million, compared with a net loss in the same period a year earlier. Software and services revenue rose 43% to $437 million, while connected devices revenue increased 16% to $472 million. On a quarter-over-quarter basis, revenue had reached $904 million in the second quarter, up 35% year over year, after the company raised its full-year growth forecast at the time to a range of 32%–34%. Third-quarter gross margin also fell to 56.7% from 60.1% a year earlier. Axon attributed the decline mainly to a higher mix of counter-drone equipment, memory costs and the expansion of new product categories.

The company added that the timing of a federal Dedrone deployment worth about $30 million, which had been expected to be recorded in the third quarter, was affected by the delay. Axon forecast fourth-quarter revenue of between $990 million and $1.01 billion, and adjusted earnings before interest, taxes, depreciation and amortization of between $245 million and $250 million. The company expects the investment transactions to close during the fourth quarter of 2026 and the first quarter of 2027, subject to customary closing conditions. The deal’s execution therefore extends into early next year, while its commercial impact through exclusive distribution will begin after the arrangements are completed. Coming periods will show how this expansion coincides with the recovery of revenue timing related to the delayed Dedrone deployments.