Axon invests $1.2 billion in Skydio and becomes its exclusive public safety distributor for the United States and Canada

Axon will invest $1.2 billion in Skydio, lifting its fully diluted stake in the drone maker from roughly 15% to about 37%, the company announced Thursday. The deal, structured at a $5.2 billion pre-money valuation, also makes Axon the exclusive distributor of Skydio drones to public safety agencies in the United States and Canada. It is the largest single investment in Axon's history.

Only a fraction of the money goes to Skydio itself. A $254.9 million purchase of new Series G preferred shares closed Thursday, paid half in cash and half in stock. The rest is a tender offer for up to 68.45 million shares held by existing Skydio investors, with further secondary purchases expected to close in the fourth quarter of 2026 and the first quarter of 2027.

Axon pre-funded the purchase with $1.15 billion in zero-coupon convertible notes due 2031, priced in September. CFO Brittany Bagley said the proceeds add cash to the balance sheet and fund part of the investment. The shares are non-voting, and Bagley said Axon has neither control nor the kind of influence that would require consolidating Skydio's results. Asked whether the deal is a path to full ownership, founder and CEO Rick Smith said the two sides considered other structures. "We'll see what the future holds," he said.

A channel that already existed, now locked in

Axon has sold Skydio drones through its Axon Air program since 2021 and added the docked Drone as First Responder package in June 2024. Thursday's exclusivity agreement formalizes that channel and shuts the others. Skydio counts more than 1,500 public safety customers and expects roughly $1 billion in bookings this fiscal year. It says 28 million Americans now live within two miles of a Drone as First Responder dock.

Axon president Josh Isner called the exclusivity one of the deal's most valuable pieces. "Whenever Skydio is in a deal, they generally don't lose it," he said on the earnings call. Axon books the drone revenue on a net basis in its Software & Services line, which the shareholder letter describes as "pure-margin revenue." Goldman Sachs analyst Michael Ng asked whether the take rate exceeds the low-to-high single digits typical of IT distribution. No one answered with a number.

Neither company has said what happens to agencies that bought Skydio directly or through another reseller. The press release, SEC filing, and earnings call do not mention existing channels. Bry's statement in the release says only that Axon is "becoming our exclusive channel for U.S. and Canadian public safety." The deal also adds Canada, where Vancouver Police launched the country's first docked DFR program in June with six Skydio X10 aircraft.

Three federal deals slip, shares fall

Axon reported record third-quarter revenue of $909 million, up 28% but below the $934 million analysts expected, and cut its full-year outlook to $3.61 billion to $3.63 billion. Three Dedrone counter-drone deployments worth $130 million slipped out of 2026. Isner blamed federal procurement cycles around funding and elections. Bagley said demand remains intact. "It truly is just a timing piece," she told analysts. The stock closed at $382.56 Thursday before trading near $314 Friday, a drop of roughly 18%.

Axon bought Dedrone in 2024 and now sells the two drone businesses as a pair - Dedrone for airspace security and Skydio to respond. Smith told analysts the company now covers both sides of the airspace. The companies' own figures credit Skydio DFR with cutting priority response times by as much as 65%, with the drone arriving before officers on roughly 80% of the calls it flies.

Why this matters for government and operations professionals

For a city, the practical change is that a Skydio DFR program is now an Axon contract. Agencies already running Axon Evidence will find the sole-source justification for the drones straightforward, and bundled deals - like Lakeland's $22 million contract covering drones, body cameras, and Fusus - are the sales motion going forward. The outcome agencies are buying is faster response times, not a specific aircraft. The price of that outcome, however, depends on a regulatory moat: federal and state restrictions on Chinese-made drones keep DJI out of much of American police procurement. If DJI's Ninth Circuit challenge to the FCC's Covered List narrows those restrictions, the value of every DFR contract signed at today's prices between now and then changes with it.