People gather at the Axon booth on the exhibit floor during the annual International Association of Chiefs of Police (IACP) conference in San Diego, California, U.S.,October 16, 2023. REUTERS/Mike Blake

By Aatreyee Dasgupta

(Reuters) -Shares of Axon Enterprise slipped 18% on Wednesday, extending their fall a day after the Taser maker missed analysts' estimates for third-quarter profit due to higher costs from U.S. tariffs.

The Arizona-based Axon's shares had fallen nearly 21% after market hours on Tuesday following the results.

Axon, which makes police body cameras and supplies drone systems to law enforcement, posted a dip in quarterly gross margins as it struggled to contend with tariff-related expenses.

"This was the first quarter that we had a full quarter of impact from tariffs. So as we look at the year-over-year step down, that really is attributable to tariffs," CFO Brittany Bagley said in a post-earnings call.

Earlier this year, Axon had warned that tariffs could hinder the procurement of imported raw materials and limit exports.

The company buys components from suppliers in the U.S., Taiwan, Mexico, China, Vietnam, Thailand and the Republic of Korea, as per its latest annual report.

"While we acknowledge investor apprehension, particularly given the valuation, we believe these concerns are likely overblown," analyst Joseph Cardoso said in a J.P. Morgan equity research note on Wednesday.

Analysts at TD Cowen said they see no fundamental concerns and would take advantage of the share price decline.

On an adjusted basis, Axon earned $1.17 per share for the quarter ended September 30, while analysts on average estimated $1.52 per share, according to data compiled by LSEG.

But the company's quarterly revenue rose 31% from a year ago, driven by strong demand across segments. Axon also raised its annual revenue forecast to $2.74 billion, up from its previous range of $2.65 billion to $2.73 billion.

Including session's moves, the shares have fallen 3.5% so far this year.

(Reporting by Aatreyee Dasgupta, additional reporting by Aishwarya Jain in Bengaluru; Editing by Sahal Muhammed)