Nvidia is the greatest stock of the past decade, as measured by price appreciation. According to Macrotrends, the stock price rose at a compound annual growth rate of 76% over the last 10 years, as of this writing. That rate managed to turn a $10,000 investment into more than $2.69 million.
Nvidia has been a great stock, but it’s not the only one. There are other great performers over the past decade as well. Take Axon Enterprise (AXON -4.06%), for instance.
Its returns don’t quite match Nvidia’s. But Axon’s stock price has compounded at a 39% annual rate over the last 10 years. That puts it in 12th place for stock performance during the past decade. And this company still has an unbelievably long runway for growth ahead of it.
How does Axon do it?
With any stock, it’s important to understand what the business does. For Axon, almost everyone knows about its first product, the Taser. Roughly 30 years ago, the company pushed the existing technology forward, developing a non-lethal weapon for self-defense. But it wasn’t long before law enforcement agencies started adopting it.
If Axon had remained a single-product business, I doubt investors would have been rewarded as richly as they have been. However, the company evolved into a multiple-product company, providing more and more opportunities for growth.
Give Axon founder and CEO Rick Smith a lot of credit. In the earnings call for the third quarter of 2024, he reminded investors of his priorities by saying, “I spend the majority of my time with our customers and with our product teams, ensuring that we are inventing and focused on the right things and aligning our efforts where our customers need us and where they need us to be for their future.”
In other words, Axon isn’t a company building a product and trying to find a customer. It has customers and builds products to their needs. That might sound like a no-brainer proposition, but very few companies take the time to get to know their customers as well as Axon does.
Axon’s product portfolio today includes body cameras, software to simplify paperwork, cloud storage, drones, and more. And according to management, it’s just now entering into a new phase of product diversification.
The next wave of growth for Axon
Artificial intelligence (AI) is all over the financial headlines these days, and it shouldn’t be surprising that Axon is looking to the technology as well. Management says that it’s moving into AI as well. Over the next year, the company plans to launch around 10 AI products. Axon intends to bundle these products into one subscription service so that its customers have access to new AI tools as they come out.
Law enforcement can benefit from AI tools in practical ways. For starters, AI can transcribe audio from Axon body cameras, reducing paperwork time for officers. Moreover, Axon intends to launch live translation AI in early 2025, allowing officers to communicate even when there’s a language barrier.
Another reason to like this new phase of growth for Axon is that AI represents a recurring revenue stream, which is partly what’s allowed it to be the 12th-best stock of the decade in the first place.
Axon’s push into software allowed more of its revenue to be recurring on a subscription basis. Just five years ago in Q3 2019, the company had annual recurring revenue of $142 million. Fast-forward to Q3 2024, and it now has $885 million in annual recurring revenue — up more than 500% in five years.
This dynamic has also given Axon’s management greater visibility into the future. Some of its contracts are 10 years in length, which is a great thing for planning purposes. Right now, the company’s future contracted revenue sits at an all-time high of $7.7 billion. And the upcoming Q4 is historically a strong quarter for new contracts. Not only does AI represent another growth opportunity for Axon from a product-development perspective, it also helps build the business into a recurring-revenue powerhouse, which is what it wants.
Don’t bet against Axon’s future growth
Axon stock is up by an incredible amount over the last 10 years, but the future still looks exceedingly bright. Keep in mind that I’ve only discussed ongoing growth opportunities from a product perspective. But much more could be said for growth from a market-opportunity perspective; the company is branching out from its core U.S. law enforcement market into international markets, private security, and federal agencies.
All told, this makes Axon stock a tough one to bet against when thinking about the next 5 to 10 years.
