Arlo Technologies Q1 Earnings Call Highlights

Key Points

• Arlo posted a strong Q1 2026, with revenue up 26% year over year to $150 million and non-GAAP EPS up 86% to $0.28, both above the top end of guidance. The company also added 318,000 paid accounts, pushing its paid base above 6 million sooner than expected.
• Services growth continued to drive profitability, as subscriptions and services revenue hit a record $90 million, up 31% year over year and 60% of total revenue. Services gross margin reached a record 85.4%, while consolidated non-GAAP gross margin rose above 50% and adjusted EBITDA climbed 85% to $30.4 million.
• Management highlighted future growth catalysts and capital returns, including upcoming partnerships with ADT, Samsung and Comcast, plus the Aloe Care acquisition for aging-in-place services. Arlo also authorized a $50 million share buyback, while maintaining its full-year 2026 outlook and forecasting Q2 revenue of $145 million to $155 million.

Arlo Technologies NYSE: ARLO reported record first-quarter 2026 revenue and earnings, with management pointing to rapid growth in paid accounts, higher average revenue per user and expanding services margins as the main drivers of the quarter.

CEO Matt McRae described the period as a “spectacular quarter” and said both revenue and non-GAAP earnings per share came in above the top end of the company’s guidance range. Total revenue rose 26% year over year to $150 million, while non-GAAP EPS increased 86% year over year to $0.28.

McRae said Arlo added 318,000 paid accounts in the quarter, above its target range of 190,000 to 230,000. The company surpassed 6 million paid accounts earlier than expected, supported by growth in retail and direct channels and continued strength from partner Verisure.

Services Revenue Drives Margin Expansion

COO and CFO Kurt Binder said subscriptions and services revenue reached a record $90 million, up 31% year over year and representing 60% of total revenue. The company’s subscriber base grew 23% year over year.

Arlo’s average revenue per user increased 16% year over year to $15.60, which Binder attributed to adoption of AI-enabled service plans, upgrades to higher service tiers and new subscribers selecting premium plans. Annual recurring revenue rose 29% year over year to $357 million.

Binder said subscriptions and services gross margin reached 85.4%, a new record and up 230 basis points from the prior year. Product gross margins also improved by 340 basis points, supported by a higher mix of purchases from strategic partners and lower bill-of-material costs for devices sold through retail partners.

Consolidated non-GAAP gross margin surpassed 50%, increasing 460 basis points year over year. Binder noted that the company achieved the product margin improvement despite a 430-basis-point tariff headwind that was not present in the prior-year period.

Adjusted EBITDA was $30.4 million, up 85% year over year, representing an adjusted EBITDA margin of 20%. Non-GAAP operating expenses were $45.2 million, compared with $38.3 million in the same period last year, due to investments in research and development, headcount and operating costs tied to growth in the subscriptions business.

Product Revenue and International Demand Strengthen

Product revenue was $60.3 million, up from $50.2 million a year earlier. Binder said the increase was driven by international growth and the company’s decision to be less promotional on certain lower-converting SKUs. He said retail point-of-sale volume still rose by almost 10%.

In response to an analyst question, Binder said Verisure had a strong quarter after typical destocking trends in the third and fourth quarters. He said Verisure needed to restock to meet demand in the EMEA market.

Binder also clarified that the quarter included about $5 million of non-recurring services revenue from a strategic partner license fee related to Arlo technologies. He said excluding the item would not materially alter the trajectory of the company’s growth metrics, services gross margin or EBITDA performance.

Balance Sheet, Buybacks and Capital Allocation

Arlo ended the quarter with $167.5 million in cash equivalents and short-term investments, up $14.4 million from the same period last year. Binder said the cash balance remained steady over the past two quarters despite $44 million of cash outflows tied to inorganic investments and the share repurchase program, partially offset by about $19 million from the return of capital on the sale of a strategic investment.

The company generated $25.4 million in free cash flow, equal to a free cash flow margin of nearly 17%. Accounts receivable totaled $52 million, with days sales outstanding declining to 31 days from 34 days a year earlier. Inventory was $44 million, up from $35 million last year, with inventory turns of about six times.

McRae said Arlo’s board authorized a $50 million stock buyback program because management and the board believe the company’s market value does not reflect the value created by the business. During the question-and-answer portion, he said Arlo evaluates buybacks and acquisitions on a valuation basis and views repurchases as comparable to acquiring its own shares when management believes the stock is undervalued.

Partnerships With ADT, Samsung and Comcast

McRae said Arlo’s major partnership engagements are progressing, with commercial launches for ADT and Samsung likely in the near term. He said the Comcast integration is under active development and progressing as expected, with a material impact anticipated in 2027.

Discussing ADT, McRae said the partner has referred to the offering as ADT Blue and views it as a growth focus. He said the launch is “probably imminent” and that ADT may begin with a few channels before adding more over time, with a fuller deployment expected in 2027.

For Samsung, McRae said the offering is a safety services widget and application button that will initially appear on mobile phones and tablets and could later extend to appliances. He said it will provide immediate access to emergency services and include a small subscription component. The offering will be co-branded as “Samsung powered by Arlo.”

McRae characterized the Samsung partnership as notable because it is the first partner deal in which Arlo is supplying a software and services offering without a hardware component. He also said Arlo sees potential for additional collaboration with Samsung through SmartThings and standards such as Matter.

McRae said ADT, Samsung and Comcast give Arlo meaningful future growth opportunities. He said Comcast’s 31 million broadband households could, over time, create a services revenue opportunity comparable in materiality to Verisure, though he cautioned that adoption rates for Samsung are harder to predict. He also said Arlo expects to announce one or two additional small-to-medium or medium-to-large partners over the next 12 to 18 months.

Aloe Care Acquisition Opens Aging-in-Place Market

Arlo also discussed its acquisition of Aloe Care, a company focused on aging-in-place and home care technology. McRae said the market is currently about $23 billion and could grow to nearly $300 billion by 2034. He described the market as fragmented and lacking innovation.

McRae said Aloe Care brings hardware, services and a roadmap of AI-enabled features, including fall prediction rather than only fall detection. In response to a question, he said the acquisition was attractive because of the market size, Aloe Care’s team and its use of AI for senior check-ins and predictive care applications.

Looking ahead, Binder said Arlo expects second-quarter revenue of $145 million to $155 million and non-GAAP net income per diluted share of $0.17 to $0.23. He said the company remains confident in the full-year 2026 outlook provided last quarter for subscriptions and services revenue, total revenue and EPS.

About Arlo Technologies NYSE: ARLO

Arlo Technologies, Inc NYSE: ARLO is a provider of smart home security products and services designed for residential and small business customers. The company offers a portfolio of wireless and Wi-Fi-enabled security cameras, video doorbells, smart lighting solutions, and associated accessories. Arlo integrates advanced video analytics, motion detection, cloud storage, and two-way audio capabilities to deliver end-to-end security and monitoring solutions accessible through mobile applications and web interfaces.

Founded as a division of Netgear, Inc in 2014 and spun off as an independent public company in 2018, Arlo Technologies has established a presence in North America, Europe, Australia and parts of Asia.

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