This article first appeared on GuruFocus .
Axon Enterprise Inc. ( NASDAQ:AXON ) fell 10.11% in premarket after it reported third-quarter revenue up 28% to $908.6 million, short of analysts' consensus of $934.33 million . Non-GAAP EPS of $1.72 missed the $1.89 estimate, while GAAP EPS was $0.68, against a loss of $0.03 a year earlier.
Software and services revenue grew 43% to $437.0 million, annual recurring revenue rose 40% to $1.75 billion and net revenue retention held at 126%. Connected devices revenue rose 16% to $471.5 million, held back by an approximately $30 million federal Dedrone deployment that did not land in the quarter. Adjusted gross margin fell to 59.2% from 62.7%, on a heavier mix of counter-drone equipment, higher memory costs and newer product categories. Adjusted EBITDA rose 33% to $235.7 million.
Axon guided fourth-quarter revenue to $990 million to $1.01 billion and now expects full-year growth of about 30%, down from 32% to 34%. The lower outlook excludes three federal Dedrone deployments worth about $130 million. President Josh Isner said we can't be sure those come through this year. Axon also lowered its free cash flow target to $350 million to $400 million, from $450 million, citing an accelerated inventory build.
