Axon puts $1.2B more into Skydio and becomes its exclusive U.S. public safety distributor
Axon will raise its fully diluted stake in Skydio from about 15% to about 37% at a $5.2B pre-money valuation, and will sell Skydio drones exclusively to U.S. and Canadian public safety agencies.
Axon will invest about $1.2 billion more in Skydio, the San Mateo drone maker, raising its fully diluted stake from roughly 15% to roughly 37% at a $5.2 billion pre-money valuation and becoming Skydio's exclusive distributor to U.S. and Canadian public safety agencies. Axon announced the deal on November 5 alongside third-quarter results, and its shares fell sharply on the combined news.
How the investment is structured
According to Axon's Form 8-K, about 60% of the consideration, or roughly $720 million, will be paid in cash and the rest in Axon common stock. The final mix depends on how the Series G transactions settle, and the number of Axon shares issued is capped at 19.99% of the shares outstanding before the first closing, with any excess paid in cash.
Only the first piece has closed. On November 5, Axon bought 25 million shares of Skydio's non-voting Series G preferred stock at $10.19617 a share, a primary purchase of about $254.9 million split evenly between cash and Axon stock. Within ten business days Axon will open a tender offer for up to 68,451,508 more Series G shares at the same price, which existing Skydio holders can join by converting their holdings one-for-one into Series G. A further secondary purchase of 1,548,492 shares, paid entirely in cash, is expected in the first quarter of 2027. Axon says it is targeting 120 million Series G shares in total across all of these agreements, which at the per-share price implies about $1.22 billion. Axon expects the remaining transactions to close in the fourth quarter of 2026 and the first quarter of 2027.
The shares are non-voting. DroneNews reported that Axon chief financial officer Brittany Bagley said the stake gives Axon neither control nor the level of influence needed to consolidate Skydio's financial results, and that the purchase is partly funded by $1.15 billion of zero-coupon convertible notes due 2031 that Axon priced on September 15. Asked whether the deal leads to full ownership, CEO Rick Smith said, in DroneNews' account, that the companies had weighed other structures and settled on this one for now.
What Skydio brings
Skydio describes itself as the largest U.S.-based drone manufacturer and builds AI-guided autonomous aircraft that it says serve more than 4,000 agencies and organizations, including every branch of the U.S. military and the armed forces of 32 allied countries. In public safety, which is the channel Axon will now control in the U.S. and Canada, the company says it has more than 1,500 customers and expects roughly $1 billion in total bookings in its current fiscal year.
The product at the center of the deal is drone as first responder, or DFR, in which a drone launches from a dock and flies to an emergency call before officers arrive. The companies say more than 28 million Americans live within two miles of a Skydio DFR dock. They also say that at agencies using the program, priority response times have fallen by as much as 65% and drones arrive ahead of officers on about 80% of the calls where they are deployed. Those are company-reported figures; the release does not name the agencies behind them. Axon puts the U.S. and Canadian DFR market at about $13 billion, also its own estimate.
The same day, a weaker quarter
The announcement landed with a guidance cut. Reuters reported that Axon trimmed its 2026 revenue growth forecast to about 30%, citing the exclusion of three federal Dedrone deployments worth about $130 million, and posted adjusted earnings of $1.72 a share, below the LSEG consensus. Axon shares fell about 14% in extended trading on Thursday to $329. DroneNews put the Friday decline at about 18%, to near $314 from a $382.56 close, and reported third-quarter revenue of $909 million, up 28%, with the full-year outlook now $3.61 billion to $3.63 billion.
DroneNews attributed the $130 million slip to federal procurement cycles; Reuters did not link the cut to Skydio, and Bagley said the stake will not be consolidated into Axon's results.
Where it fits
Drone-maker capital has been moving quickly this month. Zipline said it was adding 300 Walmart sites as it raised $1.5 billion, and Shield AI raised money to buy radar maker Echodyne. Skydio's deal is different from both in that the buyer is also its main sales channel: Axon already sells cameras, Tasers and cloud software to public safety agencies, and exclusivity means a department that wants Skydio's public safety drones in the U.S. or Canada will buy them through Axon.
The next milestone is the tender offer, which Axon must launch within ten business days of the November 5 closing, with settlement expected in the fourth quarter.
