3 min read

Razor's Edge: Axon Is The Best Short in The Market...

SNOWFLAKE MULTIPLE FOR EVERBRIDGE PART DEUX

For those that remember my everbridge work i simply couldn't resist with this. For sake of speed to get my thinking out i have used supreme intelligence to synthesize my work with me augmenting some of it...

Axon is being pitched/pumped with AI buzzwords (translation, narrative drafting, evidence review, 911 call “cloud hosting”) while the financials scream:

  • massive SBC that management itself highlights as structurally large, and
  • a business that has relied heavily on M&A + equity incentives while real owner economics lag.

They’re basically trying to re-rate from “hardware + gov software” to “AI platform company” in the same moment the whole sector is being repriced on AI terminal value—and that’s absurd to me in this tape.

1) “AI Era Plan” is a packaging story, not a margin story (yet)

What bulls are pointing to:

  • Axon says $750M of bookings came from its new “AI Era Plan”.

Why that’s not the same as “AI software margins”:

  • “Bookings” ≠ revenue, and not necessarily high-gross-margin revenue.
  • It can be bundle pull-forward + pricing + contract restructuring.
  • And it can carry services / implementation / support cost, especially as they push into 911.

Short framing: AI is being used as sales narrative + contract wrapper to protect the multiple, not as proven incremental GM/FCF expansion.

2) SBC is not a footnote — it’s the business model

They are openly guiding $590M–$620M SBC for 2026.
They also call out that roughly $230M of that is tied to the broad-based Employee XSP + CEO Performance Award.

That is not “normal SBC noise.” It’s a structural tax and it’s management-designed.

Short framing: If you value it on “adjusted EBITDA” while paying employees and the CEO in stock at this scale, you are double-counting economics.

3) Investing cash burn and “roll-up optics”

Your screenshot bewilderment is common because the cash flow statement is wild:

  • They show big investing outflows (purchases of investments / business combinations), and Axon has been very active on acquisitions—Carbyne is the headline: $625M valuation.

Separately, Reuters also highlighted momentum tied to government spending; the stock reaction often ignores the quality of earnings when top-line is hot.

Short framing: This is behaving like a capital allocator + acquisitive platform while being priced like an organically scaling SaaS.

4) The “backlog” / contracted bookings narrative is a valuation shield

They’re leaning hard into “future contracted bookings” and long duration (now $14.4B, +43% YoY) and “bookings” growth ($7.4B, +46%).

But:

  • This is not GAAP RPO, it’s their own broader metric that includes contracts not necessarily treated the same way as RPO. (They describe it as an operational metric distinct from RPO in prior releases.)
  • It’s great for selling the “utility-like” story, but it can hide margin dilution, service intensity, and political pricing friction (especially in 911).

Short framing: The market is paying for “10-year contracted SaaS,” but you may be getting “10-year managed service obligations + hardware + integration.” Same bs with soundhound, and this jumped out at me fast based on way ceo behaving after his large drawdown with the tape.

5) Valuation: priced like elite software while the market is repricing “AI terminal value”

You said “Snowflake multiple.” The sell-side headlines are already reflecting “very high valuation”:

40BL MKT CAP PRE MKT

  • They’re guiding growth 27–30% with 25.5% adj EBITDA margin—fine, but not “rule-of-80 with clean GAAP.”
  • The gap between GAAP economics and story economics is widened by SBC and acquisition spend.

Short framing: in an “AI terminal value” tape, the market is selectively forgiving weak owner earnings if the story can be reframed as “AI platform + contracted demand.” Axon is exploiting that window AND THAT'S A GREAT SHORT.

MY TRADE THOUGHTS

I shorted this earlier this year and had covered and that put small amount on into close with more of a passive mindset as it has been free falling. I then shorted a little more after the pop. But after the call and few hours of work, I couldn't help but playing offense. The tape has favored moves like this totally reversing on many occasions so i like the risk reward, and I just think they have made the type of moves that are just not well tolerated anymore at valuations like this.

Like i get it when you issuing this much sbc and have seen ur stock hit like 70bl with this type of rollup approach that you gonna triple down, and that to me is the opportunity cause they sounded very absurd considering their mkt cap relative to where real economic value software platforms being valued.

My bet is new 52wk low in less than 3 weeks..let's see..