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Arlo Technologies reported record first-quarter 2026 revenue and earnings, driven by rapid growth in paid accounts, higher average revenue per user, and expanding services margins. CEO Matt McRae said both revenue and non-GAAP earnings per share (EPS) 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 described the quarter as a “spectacular quarter” and said Arlo added 318,000 paid accounts, 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.
COO and CFO Kurt Binder said average revenue per user increased 16% year over year to $15.60. He attributed the rise to adoption of AI-enabled service plans, upgrades to higher service tiers, and new subscribers selecting premium plans. Annual recurring revenue grew 29% year over year to $357 million.
Subscriptions and services revenue reached a record $90 million, up 31% year over year and representing 60% of total revenue. Arlo’s subscriber base grew 23% year over year.
Binder said subscriptions and services gross margin was 85.4%, a new record and up 230 basis points from the prior year. Product gross margins 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 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, and represented 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, reflecting investments in research and development, headcount, and operating costs tied to growth in the subscriptions business.
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 Arlo’s growth metrics, services gross margin, or EBITDA performance.
Product revenue was $60.3 million, up from $50.2 million a year earlier. Binder said the increase was driven by international growth and Arlo’s decision to be less promotional on certain lower-converting SKUs. He added that retail point-of-sale volume 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, adding that Verisure needed to restock to meet demand in the EMEA market.
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, citing management’s view that the company’s market value does not reflect the value created by the business. 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.
McRae said Arlo’s commercial launches for ADT and Samsung are 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.
For 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,” with ADT potentially beginning with a few channels before adding more over time, and 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, 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 provide 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, while 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.
Arlo also discussed its acquisition of Aloe Care, 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. He said the acquisition was attractive due to 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 Arlo remains confident in the full-year 2026 outlook provided last quarter for subscriptions and services revenue, total revenue, and EPS.
Arlo Technologies, Inc. (NYSE: ARLO) provides smart home security products and services for residential and small business customers. The company offers wireless and Wi-Fi-enabled security cameras, video doorbells, smart lighting solutions, and related accessories, integrating video analytics, motion detection, cloud storage, and two-way audio 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 has a presence in North America, Europe, Australia, and parts of Asia.
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