Axon announced a $1.2 billion investment in Skydio on Thursday that will lift its fully diluted stake in the drone maker from about 15% to about 37% once every tranche closes, based on a $5.2 billion pre-money valuation. The agreement establishes Axon as the exclusive distributor of Skydio drones to public safety agencies across the United States and Canada, in what Axon designated as the largest single investment in the company's history.
According to Axon's filing with the Securities and Exchange Commission, the funding mix consists of about 60% cash, roughly $720 million, with the remainder paid in Axon stock. The initial tranche that closed Thursday was a $254.9 million primary purchase of 25 million new non-voting Series G preferred shares priced at $10.19617 each, split evenly between cash and stock. The rest of the transaction comprises a tender offer for up to 68.45 million Series G shares from existing Skydio shareholders alongside secondary purchases, which Axon expects to close in the fourth quarter of 2026 and the first quarter of 2027.
Axon chief financial officer Brittany Bagley stated that the non-voting shares grant Axon neither control nor the level of influence required to consolidate Skydio's financial results. Bagley noted the purchase is partially funded by $1.15 billion in zero-coupon convertible notes due in 2031, which the company priced on September 15. When asked if the deal creates a pathway to full ownership, Axon founder and CEO Rick Smith indicated the parties evaluated alternative structures and settled on the current arrangement for now.
Skydio currently reports more than 1,500 public safety customers, projects about $1 billion in bookings for the fiscal year, and states that 28 million Americans live within two miles of a Drone as First Responder (DFR) dock. Axon estimates the DFR market in the United States and Canada at $13 billion. In its press release, Axon credited Skydio DFR systems with cutting priority response times by as much as 65%, noting the drone arrives before ground officers on roughly 80% of calls flown.
Alongside the investment news, Axon shares fell about 18% in Friday trading, moving near $314 after closing Thursday at $382.56. Axon reported record third-quarter revenue of $909 million, an increase of 28% that fell below the $934 million projected by analysts. The company revised its full-year revenue outlook to between $3.61 billion and $3.63 billion after $130 million in Dedrone counter-drone orders slipped past 2026 due to federal procurement cycles. Adjusted earnings stood at $1.72 a share compared to the $1.89 expected by analysts, per MarketScreener.
