Arlo Technologies, Inc.

What they do

Arlo combines a cloud platform, AI and computer-vision analytics, and app-controlled security devices into a subscription-based security ecosystem. The company sells hardware through retail and e-commerce channels and generates recurring revenue from paid subscription plans that provide AI detection, cloud video recording, professional monitoring and emergency response. Its platform is designed to integrate with third-party IoT ecosystems including Amazon Alexa, Apple HomeKit, Apple TV, Google Assistant and Samsung SmartThings.

Revenue drivers

• Subscriptions and services — Recurring revenue from Arlo Secure, Arlo Total Security, Arlo Safe and Arlo SmartCloud; in Q2 2026 this segment generated $93.0 million, or 59.7% of total revenue, and carried an 81.1% GAAP gross margin.
• Products — Hardware sales of smart Wi-Fi and LTE cameras, video doorbells, floodlight cameras and home security systems; in Q2 2026 products generated $62.9 million of revenue with a GAAP gross margin near zero, as product cost of revenue was $63.1 million.
• Paid accounts and ARR — Subscription growth is measured by cumulative paid accounts, which reached 6.3 million in Q2 2026, up 23.2% year over year, and annual recurring revenue, which reached $365.0 million, up 15.6% year over year.
• International and channel expansion — The company cites small business, government and direct home monitoring channels, plus cellular-enabled use cases such as neighborhood watch, construction site monitoring and wildlife surveillance, as growth areas beyond retail and e-commerce.

Recent performance

For the second quarter ended June 28, 2026, Arlo reported record total revenue of $155.9 million, up 21% year over year, with subscriptions and services revenue of $93.0 million, up 19%. GAAP net income was $3.0 million, or $0.03 diluted EPS, while non-GAAP EPS was $0.28 and adjusted EBITDA was a record $30.6 million, or 19.6% margin. GAAP gross margin was 48.2% and non-GAAP gross margin was 50.6%, both up year over year. Cash and cash equivalents plus short-term investments totaled $141.1 million at quarter end, and the company repurchased $22 million of common stock during the quarter under a $50 million authorization. First-half 2026 free cash flow was $33.9 million.

Strategy

Arlo plans to keep launching new smart security devices, including in categories beyond cameras, and to grow registered accounts and paid subscriptions on its platform. The company is investing in AI and computer-vision capabilities for its subscription services and in professional monitoring and emergency response features. It completed the acquisition of Aloe Care Health, reflected in $47.9 million of goodwill and $25.7 million of intangible assets on the June 28, 2026 balance sheet, and announced an expanded Aloe Care partnership with Home Helpers Home Care for an AI-powered wellness service. It is returning capital through a $50 million stock repurchase program. Management also cites strategic partnerships, including a collaboration with Verisure, as a route to expand distribution.

Risks

• Supply chain concentration — Arlo obtains several key components, including custom lens, lens-sensors, passive infrared sensors and batteries, from limited or sole source suppliers and relies on a limited number of third-party manufacturers for substantially all manufacturing.
• Hardware margin pressure — In Q2 2026 product cost of revenue of $63.1 million exceeded product revenue of $62.9 million, so profitability depends heavily on the subscription and services segment rather than device sales.
• Customer concentration — The company's risk factors identify dependence on certain significant customers as a risk to its results.
• Quarterly results volatility — Arlo states that it expects its results of operations to fluctuate on a quarterly and annual basis, which could cause its stock price to decline.

Outlook

Management said it is increasing annual guidance on both total revenue and EPS for 2026 after the second-quarter results. The third-quarter and full-year 2026 outlook covers revenue and diluted EPS on both a GAAP and non-GAAP basis. Guidance assumes continued strength in subscriptions and services revenue, which drove the reported top- and bottom-line growth.