Duffy Warns of More Flight Cuts If Government Shutdown Drags On

Summary

Bloomberg Businessweek

Episode: Duffy Warns of More Flight Cuts If Government Shutdown Drags On

Date: November 7, 2025
Hosts: Carol Massar, Tim Stenovec

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Episode Overview

This episode centers on the escalating impact of the ongoing US government shutdown, particularly on the airline industry, as the busy holiday travel season approaches. Bloomberg Intelligence’s George Ferguson discusses how the shutdown may force further flight cuts and airline disruptions, while LinkedIn’s Chief Economist Karen Kimbrough gives a real-time snapshot of the US labor market. Later, market volatility and portfolio strategy are examined with Alexis Brown Roberts, and Rick Smith of Axon Enterprise discusses company growth, acquisitions, and tech sector challenges.

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Key Segments and Insights

1. Airlines, Government Shutdown, and the Holiday Rush

With: George Ferguson, Bloomberg Intelligence Aerospace/Defense/Airlines Analyst
Segment Start: 01:47

• Status at Newark and National Outlook

  • George Ferguson just arrived at Newark after a flight from Miami. The experience was smooth, as carriers are making initial cuts (estimated at 10% or less) focused on the 40 most important airports.

    “If you’re going to a core market for an airline...they’re going to get that traffic through.”
    – George Ferguson (02:18)

• Thanksgiving Travel Disruption Risks

  • With less than three weeks to Thanksgiving, concerns rise over a projected 20% disruption (per Secretary Sean Duffy) if the shutdown continues, especially as leisure travel picks up at month’s end.

    “If we don’t have the government shutdown stopped, Thanksgiving will be an absolute mess because I would expect there’ll be even more cancellations.”
    – George Ferguson (03:27)

• Airline Profitability & Financial Impact

  • Short shutdowns might let airlines trim underperforming routes for slight margin gains; a prolonged disruption could seriously hit earnings in Q4, particularly if it extends into the core holiday periods.

    “If we get into Thanksgiving and this is still going on...then we’re going to start to get much more concerned...about profitability.”
    – George Ferguson (04:54)

• Corporate Jet Travel Update

  • The private aviation sector remains robust, unaffected by disruptions, with strong backlogs for Bombardier and Embraer.

    “That market continues to stay strong...people came to private aviation after the pandemic and it appears they’ve stuck around.”
    – George Ferguson (05:37)

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2. Labor Market Update – Real-time Data from LinkedIn

With: Karen Kimbrough, Chief Economist, LinkedIn
Segment Start: 09:09

• Current Labor Market Assessment

  • Described as “softening,” with gradual fragility and slight decline in hiring rates since October.

    “Softening.”
    – Karen Kimbrough, when asked to sum up the jobs market in one word (09:27)

• Wage & Job Market Disparities

  • Contrary to expectation, hiring shows relative strength in construction, leisure, and hospitality, sectors that predominantly hire hourly/lower-income workers, while overall confidence and hiring rates continue to ease.

• Trends on LinkedIn: Skills & AI

  • Marked increase in mentions of layoffs; employees are quitting less, suggesting market caution.
  • Massive surge (70%) in demand for AI literacy skills—anticipated to transform over 85% of roles on the platform in coming years.

    “They want candidates who can...know how to use AI...70% increase in jobs looking for AI skills.”
    – Karen Kimbrough (11:29)

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3. Market Volatility and Investment Strategy

With: Alexis Brown Roberts, CEO & Portfolio Manager, Alexis Investment Partners
Segment Start: 13:29

• Market Mood & Correction

  • Current environment described as “volatile,” with recent strong recovery but now due for an expected pullback due to rich valuations.

    “Right now, volatile is a pretty good way to describe the market.”
    – Alexis Brown Roberts (13:59)

• Government Shutdown and Market Impact

  • Historically, markets initially brush off shutdowns, but a prolonged standoff could disrupt seasonal spending and market resilience.

    “The longer that this drags out, the more that it’ll be difficult for the stock market to really continue to brush it off.”
    – Alexis Brown Roberts (16:35)

• Sector Positioning

  • Shift toward portfolio diversification as tech weighting in S&P 500 surpasses previous records. Preference for incremental adds rather than aggressive tech overexposure.

    “Should you go diving straight into even more big tech at these valuations? That depends...”
    – Alexis Brown Roberts (17:51)

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4. Spotlight: Axon Enterprise – Growth, Acquisitions, and Valuation

With: Rick Smith, Founder and CEO, Axon Enterprise
Segment Start: 22:31

• Stock Volatility vs. Company Growth

  • Despite strong operational results and high growth rates, the stock saw a sharp drop post-earnings, attributed to one-off accounting charges and investor sensitivity to high valuations.

    “Don’t even look at the stock price...where we stay focused is building the long term business.”
    – Rick Smith (22:51)

  • Explained that stock-based compensation, linked to high performance, temporarily dents GAAP earnings, while adjusted results remain strong.

• Sector Allocation and Future Bets

  • Revenue mix has shifted toward software and services (now ~61%), but hardware (notably Tasers) remains crucial, especially with opportunities for international expansion.
  • New acquisitions target the mission critical voice and AI space, aiming to digitally transform emergency and law enforcement communications.

    “AI plus Voice now is a very magical moment...10% of our core business bookings this year are going to be on our AI services.”
    – Rick Smith (25:47, 26:51)

• Surveillance, Ethics, and Community Backlash

  • Recognizes growing concern over surveillance. Axon maintains an Equity and Ethics Advisory Council for preemptive ethical review and aims to balance public safety with privacy.

    “We build safeguards in that help minimize the risk of abuse while maximizing the opportunity.”
    – Rick Smith (30:07)

• Federal and Local Agency Use

  • Axon’s platform allows government customers to control data sharing, tailored to local/state regulations and community preferences rather than a one-size-fits-all approach.

• Acquisition Pipeline

  • Pausing on further acquisitions after two strategic purchases in rapid succession, citing their complementary strengths and unexpected opportunity.

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Notable Quotes

• On Airline Disruptions:
  “If we don’t have the government shutdown stopped, Thanksgiving will be an absolute mess...”
  – George Ferguson (03:27)

• On Labor Market Mood:
  “Softening.”
  – Karen Kimbrough (09:27)

• On Tech Labor Evolution:
  “70% increase in jobs...looking for AI skills. We think more than 85% of the members...are in roles...to be transformed by AI.”
  – Karen Kimbrough (11:29)

• On Market Pullback:
  “Should you go diving straight into even more big tech at these valuations? That depends...”
  – Alexis Brown Roberts (17:51)

• On Stock Price Volatility:
  “Don’t even look at the stock price...where we stay focused is building the long term business...”
  – Rick Smith (22:51)

• On Surveillance & Ethics:
  “We build safeguards in that help minimize the risk of abuse while maximizing the opportunity.”
  – Rick Smith (30:07)

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Timestamps for Key Segments

• Airlines & Government Shutdown (George Ferguson): 01:47 – 06:38
• Labor Market/Labor Market Data (Karen Kimbrough): 09:09 – 13:03
• Market Outlook & Strategy (Alexis Brown Roberts): 13:29 – 18:47
• Axon Enterprise Interview (Rick Smith): 22:31 – 32:51

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Summary

The episode offers a comprehensive snapshot of challenges facing US travel, labor markets, and investors due to the ongoing government shutdown and broader economic shifts. Analysts warn of severe fallout in air travel if the standoff persists, while LinkedIn’s real-time data points toward a softening but evolving job market increasingly oriented around AI skills. Investors are counseled to diversify as markets display growing volatility and tech sector concentration. Meanwhile, Axon Enterprise demonstrates the rewards and risks of tech-forward growth, acquisition strategies, and the critical importance of public trust amid expanding surveillance capabilities.

Transcript

[Carol Massar]

Bloomberg businessweek is brought to you by Evolving Money, a podcast that explores how cryptocurrency is the next logical evolution of the financial system. Follow the podcast, which is sponsored by Coinbase, wherever you get your audio programs. Being a small business owner isn't just a career, it's a calling. Chase for Business knows how much heart and effort go into building something of your own. Manage all your business finances, from banking to payments to credit cards, all in one place with their digital tools. Plus access online resources designed to help your business thrive. Learn [e-mail] business chase for business Make More of what's yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply JPMorgan Chase Bank NA Member FDIC Copyright 2025 JPMorgan Chase & Co.

[Tim Stenovec]

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[Bloomberg Businessweek Daily Announcer]

Bloomberg Audio Studios Podcasts Radio News this is Bloomberg businessweek Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily Podcast with Carol Massar and Tim Stanweck on Bloomberg Radio.

[Carol Massar]

All right, we want to stay on airlines and we're curious about what's going on, you know, at Newark, but around the country and, you know, ultimately what could be the impact on the carriers themselves, especially if we see a reduced flight schedule. Also on the ground at Newark Liberty International Airport is Bloomberg Intelligence senior aerospace, defense and airlines analyst George Ferguson. George, there you are. You just flew in, right?

[George Ferguson]

Hi, I just came in. Hello. I just came in from Miami. Yes.

[Carol Massar]

How did it go?

[George Ferguson]

Yeah, it was, it was pretty smooth. Like I would, I would expect when they knocked down, you know, the initial call is 10% or Norma Linda said, maybe less than that of flights to the 40 most important airports, I'd expect that things would run a little easier. I feel bad for people that had their flights canceled, but I think if you're going to a core market for an airline and I was coming up from Miami, that's pretty core for United. Airplane was absolutely full. I don't think there was another seat empty on it. They're going to get that traffic through because they're going to look at the most, hmm, efficient and you know, best profit making flights and make sure they push them through.

[Tim Stenovec]

George, we are less than three weeks away from one of the busiest travel days of the year. That would be the time around Thanksgiving. And I'm wondering if we do see continued government shutdown, these workers not getting paid, if indeed what happens comes true. What Transportation Secretary Sean Duffy said earlier that we could see up to 20% disruption. What does the holiday season look like for these air carriers?

[George Ferguson]

Yeah, I mean, that's what we're concerned about. Right. So we have a report that will go out Monday on the Bloomberg terminal. You know, look, we were looking at sort of total seats put into the market during 4Q. 4Q isn't typically a very busy time for the business. Right. It's not a high profit season for them. And November is actually the lowest of that season. It's got the least number of seats flown, but. But it's deceiving because, you know, November's when the business traveler kind of stops. Right. I was just down at a conference in Miami. That's about the last conference I think you'll see before we roll into Thanksgiving here in the US So business kind of rolls off here in the middle of the month and leisure picks up very big in a big way by the end of the month. So I think if we don't have the government shutdown stopped, Thanksgiving will be an absolute mess because I would expect there'll be even more cancellations and then you get another ebb between Thanksgiving and Christmas. Hopefully. We're not talking about sort of Christmas, year end sort of celebrations, you know, having the government still out by then, I don't think they can make it that long.

[Carol Massar]

But hey, George, just real quickly, you know, when do you start to like, kind of rewrite some of your, you know, expectations in terms of earnings or revenues, the balance, you know, the balance sheets, the financials for the airlines. Does this have to go on for several days, for several weeks before it becomes something material for the big airlines and all of them, really?

[George Ferguson]

Yeah, I think you're right on it.

[Tim Stenovec]

Right.

[George Ferguson]

I think if we get into Thanksgiving and this is still going on, we're cutting back capacity, then we're going to start to get much more concerned to start rethinking about where profitability, profits, cash flow go for 4Q right now. This could even be a slight pick up where airlines sort of knock down their least performing flights and get maybe a little bit of a margin pick up. Maybe profit ebbs a little bit on it, but right now it does. It's not major get into Thanksgiving. We've got an issue.

[Tim Stenovec]

George, before we go, let you go. You were down in Miami. You were there for a conference on corporate jet travel. Just give us an update there. It's an area that certainly you and other analysts watch. Those flights not disrupted right now.

[George Ferguson]

No. And that's an advantage of having private, having your own airplane, private aviation. And one of the reasons people go there is because of that less, you know, less security issues. That market continues to stay strong. I'm pretty impressed. We've had earnings this week from Bombardier and Embraer. You know, the backlogs continue to, they're steady, they're not declining even as those manufacturers increase the number of airplanes they build. And there's been a number of people that came to private aviation after the pandemic and it appears they've stuck around. And so that market doing pretty good, you know, say pretty nice.

[Carol Massar]

All right. Good to know. Good to know. Especially, you know, I guess when get on our private jet for our next trip are.

[Tim Stenovec]

Yeah, yeah, our private jet.

[Carol Massar]

Yeah, George, you have that right, George.

[Tim Stenovec]

That Newark, not Teterboro right now. So we know how he got back from Miami.

[Carol Massar]

All right, safe travels to the rest of your way home. George Ferguson, Bloomberg Intelligence senior aerospace, defense and airlines analyst, of course, George Ferguson there at Newark Airport.

[Tim Stenovec]

Stay with us. More from Bloomberg businessweek Daily Coming up after this.

[Carol Massar]

Bloomberg businessweek is brought to you by Evolving Money, a podcast that explores how cryptocurrency is the next logical evolution of the financial system. The program investigates how traditional finance firms are integrating crypto into their operations now that Washington has begun to pass much needed regulations. Follow the podcast, which is sponsored by Coinbase. Wherever you get your audio programs.

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[Karen Kimbrough]

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[Carol Massar]

All right, we want to get back to kind of the things that are coming at investors in the U.S. economy. You know, certainly the economic activity perhaps out of the airline industry, if it's prolonged, this impact as a result of the government shutdown could impact and most expect it would if it's a prolonged even further shutdown. In terms of the impact on the US Economy, I will say we did get a data point. US Consumer sentiment tumbling to near the lowest on record today as the government shutdown weighed on the economy and the outlook and high prices soured views about personal finances. Consumers perceive pressure on their personal finances from multiple directions and anticipate the labor markets will continue to weaken, Tim, in the future. That's according to Joanne Su, who is director of the survey. So there's concerns about the labor market.

[Tim Stenovec]

I want to bring in Karen Kimbrough, chief economist at LinkedIn, for a check on the health of the US labor market. She joins us from Dallas. Karen, you have incredible data, real time data on LinkedIn. This is a source of alternative data today. In one word, how would you describe the state of the labor market in the US Right now?

[Karen Kimbrough]

Softening.

[Tim Stenovec]

Softening?

[Karen Kimbrough]

Yeah, it's continuing to soften. The data that we have through the end of October tells us that the labor market is just on its continued softening path. And that kind of means there's a little bit of fragility there.

[Carol Massar]

How much? There's a little fragility. And like where are you seeing the fragility? Especially when we constantly, Tim and I talk about the K shaped economy. And you know, we've had, you know, we've seen resilience in the US Economy, but a lot of it is, you know, spending by the higher income folks. And we've, you know, it's kind of underlying weakness among low and middle income households. So those higher income Americans continue to drive growth. Are we seeing that disparity in the labor market, that higher paying jobs continuing to hire and lower not or what are you seeing?

[Karen Kimbrough]

Yeah, actually it's a little different than that. So I would say there's as I said, some fragility, but actually some bright spots. So there are sectors think of like construction, leisure and hospitality that are hiring and Those are segments that often will hire, you know, hourly workers, lower income workers. So ironically, in some sense some of the sectors that are doing a little bit better in terms of hiring rates year over year are the ones where we see more hourly salaried workers. So there are bright spots, there are challenges. One thing I would kind of mention is that the story we're telling didn't change appreciably between last month and this month. It's not like it took another huge leg down, it's more like it's kind of continued same softening of decreased hiring rates. Confidence is down. I heard you mention the consumer confidence. Overall, the confidence we see in workers and their ability to find a job and keep a job is also a little bit weaker now because they can see how competitive the job market is.

[Tim Stenovec]

What about trends that you're seeing in real time on the LinkedIn platform? Hiring Trends? Hiring is down, we know that. What about. Yeah, other trends that you're seeing? What can you tell us?

[Karen Kimbrough]

Yeah, absolutely. So we are also seeing increased mentions of layoffs and these are of course just mentions these people engaging in on the platform talking about it. We're seeing by our own measure of quits. So it kind of, it mirrors the BLS's measure of quits. We are seeing quits that are also coming down just slightly. So people are kind of staying in place, not quitting as much. And that's usually a sign of a more fragile market. But I think the biggest, the biggest trend that we're seeing right now is really this fact that every industry seems to be having a different experience. So if you think about what employers are looking for, they're posting jobs on the platform and they are all almost really quite a lot of them are looking for skills like AI literacy. So that is one of the fastest growing skills. They want candidates who can come in and actually know how to use AI to increase their efficiency and productivity. So it's not like being scared of it. They're looking to extend their adoption. So 70% increase in jobs that are looking by employers looking for AI skills. We think more than 85% of the members on our platform are enrolls are going to be transformed by AI. So we're in this period of like evolution of the job market, but it's going to take some time.

[Carol Massar]

All right, we've got to run. Hey listen, great stuff and so appreciate your time on what's supposed to be a monthly jobs report this morning, but it's a little bit of a different jobs, right? Welcome to Bizarro World, everybody. Karen Kimbrough, she's chief economist over at LinkedIn.

[Tim Stenovec]

Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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[Tim Stenovec]

I want to bring in Alexis Brown Roberts, CEO and portfolio manager at Alexis Investment Partners. She's the Firm has about $185 million in assets under management. That's as of the end of July of this year. She joins us from Montgomery, Texas. Alexis, the environment right now. I mean, even as Carol was reading her introduction to you, we're getting breaking news from the president targeting certain companies, in this case meatpacking companies that send shares lower. What is the market environment right now? How do you define it?

[Alexis Brown Roberts]

Well, hi Tim and Carol, thanks again for having me on. Right now, volatile is a pretty good way to describe the market. Currently. We've had a pretty great run, although this year in general for investors has been a little difficult. It's hard to realize now that we're basically a broken record, having been breaking records over and over again, just breaching 6700 recently that back in April we took a pullback of what, 19%? And that was hard because it spooked some investors, but it also gave a great buying opportunity back then. But since this big runoff since then, we have predicted a bit of volatility. We've had a great run and so markets were due for a pullback, and that's exactly what we're seeing right now.

[Carol Massar]

So do we get more of a pullback, Alexis, in your view?

[Alexis Brown Roberts]

I think that with valuations being so rich as they are now, we were due for some type of pullback or a correction. I don't necessarily think that it's going to be a huge one, though, especially as today is a perfect example. Right. We had that pullback, but then before we even got this government shutdown news, we started to see some folks coming in and really buying the diplomatic. And I think we're going to continue seeing that support, particularly as we work through a seasonally favorable period. Through the end of the year, we're seeing the Fed move in the right direction, lowering interest rates, and that's making a money market where people were happily earning 5% or more to now earning less than 4%. Maybe you're going to see that money going into some more productive investments from here. So that may support the market to go higher from here, although maybe not quite as big of a shoot up as we've experienced out of the pullback.

[Tim Stenovec]

Well, it's a Friday afternoon with less than 15 minutes to go to the close of equity trading, which means we are getting a lot of headlines. Carol, including Jonathan says that the Democratic proposal not to close, not, excuse me, not close to what needs to be done. So getting more information on the Republicans rejection of that offer from Senate Minority Leader Chuck Schumer that we heard during the 2 o' clock hour. And then also completely separately Samsung in talks with Barclays to launch a US Credit card. This according to the Wall Street Journal. Alexis, on the John Thune headline, he says that the Democrat proposal not close to what needs to be done to reopen the government. How do you think about the government shutdown with regard to your portfolio and the money that you manage?

[Alexis Brown Roberts]

Yeah, from a personal perspective, I mean obviously it's disappointing to see the government not working as a taxpayer. But from a portfolio perspective, so far the stock market's done a good job of kind of brushing this off, which is pretty in line with history. That being said, the longer that this drags out, the more that it'll be difficult for the stock market to really continue to brush it off, especially as we head into a pretty heavy spending period and some folks are going to continue experiencing pain that they just don't really need.

[Carol Massar]

So you know, we've talked about the overweight when it comes to big tech and infotech. The S&P 500 InfoTech's weight in the benchmark S&P 500 now accounts for more than 35% last month overtaking the previous peak set at 34.88%. That was back in March of 2000 when the tech bubble burst. You know, we've got a chart up for those who are watching on YouTube and Bloomberg Original. So you can see on the left the tech overweight where the rest of the market in the S&P 500 there the weighting has, has gone down that overweight. Where do your investors that you are working with, where do they want to put their money or new money to work here? And just got about 40 seconds.

[Alexis Brown Roberts]

Yeah. So we're lucky in terms of where new money is coming in because we do run a fund that is diversified and tactical. So for any new money that's coming in, we're really looking to add incrementally. Mostly there's recognizing that. Absolutely technology has gotten overdrawn. We still like tech names, but we have pared back exposure there. Maybe if we go down more than we'll do something that looks like buying, they're probably just covering some covered coffins that we have on some of those names. But but that being said, should you go diving straight into even more big tech at these valuations? That depends on what your weighting is your portfolio now. But I think there's more interesting opportunities, more diversified right now.

[Carol Massar]

Interesting. So some diversification going on certainly that you're suggesting for for your investors. Alexis, thanks so much. Have a great weekend. Alexis Brown Roberts, Chief Operating Officer and Portfolio Manager at Alexis Investment Partners.

[Tim Stenovec]

Stay with us. More from Bloomberg Businessweek Daily Coming up after this.

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[Carol Massar]

All right, folks, here's one stock that's actually bucking the downward trend in today's session we're talking about Exxon Enterprise is up about 2 1/2 percent. Keep in mind, it dropped about 8% yesterday. Let's lay it out for you because we did see a bunch of analysts cutting their price targets on Thursday following earnings on Tuesday, late Tuesday. This is according to data compiled by Bloomberg. So 5 changing the price targets. The average change was down 12%. 4 cut price targets by an average of 16%. 1 did raise a price target by about 1%. No changing their investment recommendations. The company most known for its Tasers, but it's been expanding what it does, as I said, reported earnings Tuesday after the close. The stock's been under pressure, but it has had quite a run, up about 26% in the past year, down more than 30% since hitting a record in early August. And I do think it's worth noting the stock is up more than 30, 30, 300% since the end of 2015. So roughly the last decade when it was just a $17 stock, now it trades at more than 600 a share. I wanted to lay it out because it has had quite a run and there's been a lot going on at the company.

[Tim Stenovec]

Well, back with us is Rick Smith. He's the founder and CEO of Exxon Enterprise. He joins us from Scottsdale, Arizona. Rick, good to have you back on the program. How is business right now? And the reason we ask is because investors sent the stock down 20% intraday following the latest update and news of a second second acquisition. So just give us a business update to so of start out here.

[Rick Smith]

Yeah, I'd say the business is the strongest it has ever been. You know, I've been a public CEO for like 24 years now and this is the fifth time we've come in, reported the business with really strong operating results and then the stock drops. So I just tell our people, don't even look at the stock price. Like it's going to move around for a bunch of factors. Where we stay focused is building the long term business and every previous time it's recovered and we're going to stick with that playbook. And if you look at where we're growing from some of our new investments, you know, from counter drone and fuses, real time crime centers and artificial intelligence, our bookings in those areas are up almost triple year over year. And then we just announced two new acquisitions. That is our entry into the mission critical voice space, which we think is going to be a huge opportunity over the next decade.

[Tim Stenovec]

So what are you guys seeing that investors and analysts are not seeing? Because the narrative that you have and your tone doesn't necessarily necessarily match the reaction from the street.

[Rick Smith]

Yeah, I mean, part of this, excuse me, was we did have a gap operating loss, a tiny one. But that's largely because we have this very unique stock incentive program we call the exponential stock plan. And all of our employees participate. And when, when the stock does really well and we're hitting our operating targets, stock comp goes up. And so paradoxically, the better the operating business does, the more stock comp goes up. And that was the biggest mover. But if you look at the adjusted ebitda, if you take that noise out, you know, we managed to turn in, we've got like seven consecutive quarters over 30% top line growth. And we turned in right at 25% or 24.9% adjusted EBITDA while maintaining the growth rate. And if you listen to our president who used to be the head of sales, he's very close to the customer. You know, he was pretty bullish on our conference call telling people we think the fourth quarter is going to be a monster from a bookings perspective. So we're feeling really good.

[Carol Massar]

All right, I want to come back to that monster for the fourth quarter in terms of bookings. But I want to say that, you know, Rick, you get this. You've been a CEO for a long time. When you're kind of priced for perfection, you know, investors can be like, well, wait a minute, citizens. An investor there, Trevor Walsh, said the company had little room for error in its report amid investors concerns about valuations. Stock trades at 398 times current earnings or nearly 94 times future earnings. You've got a $47 billion market cap with projected 2025 earnings of 2.7 billion. So your price to sales, or at least in terms of your market, you know, expectations. I mean, there's, there's a lot there that they expect everything to kind of just hit perfectly. There's also concerns about tariffs in the government shutdown. There's also concerns that you just did a second acquisition here less than two months after you did that agreement to acquire Prepared, which was an AI powered emergency communications Platform. So why is that valuation or why is that, you know, market cap versus sales justified?

[Rick Smith]

Well, first I probably get a note from my general counsel telling me not to use words like monster when talking about future performance. Really?

[Carol Massar]

Is your phone going off right now next to you?

[Rick Smith]

Yeah, yeah, probably is. But look through the question. Core business is really strong Gap EPS is a really hard way to value the business because I talked about, you know, the stronger the operating business, the more gap EPS gets punished with stock compensation expense. So I think something like looking at a multiple of revenue is probably a little more like going to be a little more instructive. But look, yes, we are valued as a growing company that's got to continue to deliver. And we've been delivering, I think we've had, like I said, seven quarters of over 30% growth. And it's our job as a management team to keep delivering on that. And you know, if the stock takes a breather, you know, that's kind of outside our control. And you know, I'm an optimist. It creates a great entry point for some of our long term investors and we're just going to keep chugging away working on the business to make sure we keep growing. And those two new acquisitions, they're a big piece of it. We made a very strategic move to move into mission critical voice. We think AI plus Voice now is a very magical moment and there's a lot of AI hype out there. But look, 10% of our core business bookings this year are going to be on our AI services. So we're really delivering value to our customers. And we see doing that in 911 call centers and then extending across, you know, any sort of mission critical voice communication is going to be a huge business. And we found two very complimentary businesses prepared allows us to go fast into any 911 call center and then carbine allows those customers to then go deeper and get out of the business of running all the hardware and move their entire 911 infrastructure to the cloud. And those two together we think are like chocolate and peanut butter. It's going to be, it's going to be a great combo.

[Carol Massar]

Well, I do want to ask you about those monster bookings for the fourth quarter, but having said that, tell us about you said 10% of the bookings this year are going to be on air services. You know how much is still tasers? Like give us an idea of what the business is today and kind of where you guys are positioning it, especially as you take on these acquisitions.

[Rick Smith]

Got it. Well, I'm terrible at details, but I can tell you the Taser business is, it continues to grow, even though it is a fairly mature business in the US where the real opportunity is our new Taser 10. For the first time, we have a weapon that some of our customers in Europe are saying is a better weapon for their officers than even a handgun. And if we can prove that out this winter, we'll be testing it above the Arctic Circle and heavy, you know, cold conditions with heavy clothing, which is our historically been our Achilles heel. If we succeed there, we could see Taser really become a driving force across Europe and the rest of the world outside of the US So even though it's been our core business from the beginning, Taser, we think could be the growth engine that pulls body cameras, drones, AI and all our other services right along with it.

[Tim Stenovec]

Well, let's talk about those other services, because if I go back into your earnings and look at 2017, connected devices accounted for close to 70% of your total revenue. Software and services was just over 30% of revenue. If we fast forward to just in recent years, last year that pretty much flipped where connected devices was 40% and software and services is now close to 61% of your business. How, how big does software and services get? What's the ultimate goal there?

[Rick Smith]

Well, that's sort of like asking me which of my children is my favorite. I love them all, but I mean.

[Tim Stenovec]

One of those has a higher margin, right?

[Rick Smith]

Oh, yeah, one has a higher margin. But when you can do hardware and software together, when you can do body cameras, drones in car cameras, and the software layer, you can just do so much more magical things for the customer than if you're a pure software play. So investors love the software revenue and margins, and so do we. But the hardware is also growing and really contributing. And it's when you bring it all together that we think the magic happens, and that's our real competitive advantage.

[Carol Massar]

Hey, one of the things I want to ask you about is there's been a bunch of reporting. There was a story about Flock Safety, which is one of your competitors, to be fair. And what's interesting is I guess you guys are all doing deals with the Amazon ring and this camera and, you know, footage is certainly being shared with law enforcement, whether it's ICE and others. Again, there's a lot of reporting that's being done about this and at the same time, some community backlash. So are you concerned about community pushback as we have more and more surveillance that is out there and that is a big of part. Part of your business.

[Rick Smith]

So that's one reason we're really proud of the approach we take. We have an equity and ethics advisory council that is comprised of people from communities of concern, particularly black and brown communities. Right. If we're really talking about over policing, I think that's the communities of most concern. It's all of our approaches. We run through this ethics review upfront with people that are naturally very concerned and skeptical on these issues. And we build safeguards in that help minimize the risk of abuse while maximizing the opportunity. Look, when a private consumer buys a camera to keep their home safe, they're buying it not to watch their dog when they're at work. They want to stop criminals from stealing their stuff, breaking into their house. I actually had a vehicle stolen years ago and it took me days to get the video from my home security system to the police. What we're doing with Ring, and by the way, we encourage open sharing standards like RING is sharing with our competitors. We openly share on a reciprocal basis with our competitors. We think this is like doing the right thing with all these cameras out there. We should be using them to deter crime and criminal activity. And we think you can do that without having to track everybody, you know, where they go to in their personal lives. We're talking about detecting dangerous criminal acts and deterring those acts in the first place.

[Tim Stenovec]

So that's with a lot of local law enforcement agencies. Agencies. I'm curious about the conversations that you have at the federal level with the Department of Homeland Security, for example, and the way that their officers do or do not use your products. What are the conversations that you have at the federal level with dhs?

[Rick Smith]

Yeah, we certainly work with the federal agencies as well. And I think where there is some controversy is like, look, people have different perspectives in different states and in different cities. And our system is built. So they're like, hey, if you are, you know, a city in a very deep, progressive area, you can choose who and how you share your data. And look, if you're in a border town in a red state and you want to be more collaborative with those federal agencies, one thing I'll tell you, we don't. It's not our position to try to dictate how government customers and that's who we sell to. A private corporation shouldn't be telling government how to. How to use their own data. But what we do is we enable them to make decisions so those elected officials can be responsive to their voters and we can be responsive to their communities.

[Carol Massar]

One last question. Two acquisitions in as many months? Is there more to come?

[Rick Smith]

We're probably going to take a little breather here. We were not expecting when we went into this we thought we would make one acquisition, but we found that these two were, were really so complimentary that, you know, sometimes you got to move quickly when opportunity knocks. And so yeah, this was unexpected, but we're really excited about it.

[Carol Massar]

All right, totally get that. Rick. Thank you so much as always. Love checking in with you. Rick Smith. He is founder and CEO of Axon Enterprise.

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[Carol Massar]

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[Rick Smith]

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[Rick Smith]

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