Axon Enterprise, which supplies the Taser, body cameras and cloud-based digital evidence systems to law enforcement, easily beat second-quarter earnings estimates after Tuesday's close.
Yet the best news was how its Draft One artificial intelligence service is taking off, though it didn't meaningfully impact Q2 results. Axon stock is surging higher, flashing an early entry in Wednesday morning stock market action.
"Our customers' response to Draft One is better than anything I've seen, better than we could have imagined," Axon CEO Patrick Smith said in a Tuesday afternoon earnings call.
Draft One, launched in April, writes the first draft of a police report based on Axon Body Camera recordings. Axon says the AI-enabled product saves more than 50% of the time in writing reports. While immaterial to Q2 results, Draft One has generated over $100 million in yet-to-be recorded revenue faster than any other Axon software product, Smith said.
William Blair analyst Jonathan Ho wrote in a Wednesday note that Draft One could help drive adoption across Axon's platform of solutions, since it requires other subscriptions, including transcription, connectivity and Axon Cloud.
Ho wrote that Axon's fast growth may "be sustained for longer than investors anticipate" as it uncovers more opportunities to add value to customers, potentially improving the efficiency and effectiveness of public safety agencies.
Axon Earnings
Estimates: Analysts expected Q2 earnings per share to slip 8% to $1.02 as revenue grew 28% to $477.9 million.
Results: Axon earnings per share rose 9% to $1.20. Revenue leapt 34.6% to $504.1 million, the second-straight quarter of accelerating growth.
That growth was broad-based. Axon Cloud digital evidence management revenue grew 47% to $194.7 million. Sensors, including body and fleet cameras, brought in $112.4 million in revenue, up 28%. Taser revenue, including virtual reality training, rose 28% to $197 million.
Outlook: Axon raised its full-year revenue outlook to a range of $2-$2.05 billion, up from $1.94-$1.99 billion.
Axon Stock
Axon stock soared 19.4% to 352.25 in Wednesday afternoon stock market action, rising as high as 367.95 before cooling off.
After breaking support in turbulent markets on Friday and Monday, Axon rebounded 3.1% to 295 to its 50-day moving average on Tuesday.
On Wednesday, Axon gapped up to 332 at the open, clearing an official 329.87 buy point, according to MarketSurge. The top of the buy zone is 346.36.
Keep in mind that while a market rally attempt has just gotten underway, investors should exercise a higher degree of caution.
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