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When investors think about the biggest winners on the S&P 500, the usual names pop up. Nvidia, Palantir, AMD and Tesla have all enjoyed meteoric rises. But while these stocks have dominated headlines, one lesser-known tech firm has quietly been climbing the ladder.
That company is Axon Enterprise (NASDAQ: AXON). Over the past decade, its share price has soared more than 3,200%. That makes it the fourth-best performing stock on the S&P 500 since September 2015. Based in Arizona and founded in 1993, Axon develops, manufactures and sells conducted electrical weapons under the TASER brand. It also provides software and body camera solutions for police forces and security services across the world.
The new US-UK Technology Prosperity Deal (TPD), backed by over $350bn in public and private investment, could help to boost defence stocks like Axon.
But the stock already trades at a hefty $776 per share. So the big question is whether there’s still room for investors to consider it, or if the best gains are already baked in.
Financials
Looking at the latest numbers, revenue has been a real bright spot. For the second quarter of 2025, sales rose 32% year on year to $2.39bn. Earnings growth was far less dramatic, up just 6.9% to $326m. That leaves a net margin of 13.6%, which is decent but not eye-catching compared to other US tech stocks.
What does stand out is the relatively low operating cash flow. At only $275.6m, Axon generates less cash than many smaller companies on the S&P 500. This could make it more vulnerable during periods of rising costs or slowing demand.
Valuation’s another sticking point. The forward price-to-earnings (P/E) ratio sits at 115, the ninth-highest on the index. Its price-to-book (P/B) ratio of 22.3 isn’t as steep as Palantir or Apple, but it’s still on the expensive side. Both metrics suggest investors are paying a high premium for the shares.
Risks
Investors weighing up Axon should remember that much of its recent share price growth came after a November 2024 rally sparked by strong quarterly results. Since then, momentum’s slowed and the stock’s barely moved in the past four months. This suggests expectations may already be stretched.
There are also industry risks to think about. Demand for Axon’s products often rises in times of political unrest or heightened security concerns. That could be a growth driver, but it also makes earnings unpredictable. Furthermore, with such a high valuation, even a small earnings miss could trigger a sharp fall in the share price.
My verdict
I’ve been pleased with Axon’s performance over the years, and it’s fair to say it has rewarded long-term investors handsomely. But with a valuation this rich, I think much of the easy growth may have already been priced in.
That said, US tech stocks don’t always follow logic. Axon remains a unique play in a market otherwise dominated by artificial intelligence (AI) and semiconductor stories. For investors looking to diversify into a different kind of growth stock, it’s definitely one to consider – though perhaps with a degree of caution.
