Key Takeaways:
Arlo Technologies (NYSE: ARLO) reported record first-quarter 2026 results that significantly outpaced analyst expectations, driven by accelerating growth in its subscription and services business. The smart home security company posted total revenue of $150 million, up 26% from the prior year, and a non-GAAP earnings per share of $0.28, an 86% increase year-over-year.
“During the exhaustive earnings process, the repetition of superlatives probably rings hollow, but I hope that you can see by any measure, Arlo truly had a spectacular quarter,” CEO Matt McRae said, highlighting the strong execution across the business.
The performance was fueled by the addition of 318,000 new paid accounts, bringing the company’s total subscriber base to over 6 million ahead of schedule. This growth in high-margin services continues to reshape the company’s financial profile. Services revenue climbed 31% year-over-year to a record $90 million, now representing 60% of total revenue. Average revenue per user (ARPU) also increased by 16% to $15.60. This shift drove consolidated non-GAAP gross margin above 50% for the first time.
Looking ahead, Arlo is focused on expanding its market reach through key partnerships and strategic acquisitions. The company is progressing toward commercial launches with ADT, Samsung, and Comcast, which are expected to provide material growth opportunities in 2027 and beyond. Arlo also recently acquired Aloe Care, a provider of technology for the aging-in-place market, a sector valued at over $23 billion. To underscore its confidence, the board authorized a new $50 million share repurchase program. For the second quarter, Arlo projects revenue between $145 million and $155 million.
The core of Arlo's strong quarter was the continued expansion of its high-margin services segment. Subscriptions and services revenue reached a record $90 million, a 31% increase from the previous year. This growth was driven by a 23% year-over-year increase in its subscriber base and a 16% rise in average revenue per user to $15.60.
The increasing adoption of AI-enabled service plans and upgrades to higher tiers contributed to a record services gross margin of 85.4%. The combination of higher services revenue and expanding margins pushed the company's consolidated non-GAAP gross margin up 460 basis points to over 50%. Adjusted EBITDA followed suit, rising 85% year-over-year to $30.4 million, representing a 20% margin.
Management outlined several initiatives aimed at sustaining momentum. Major partnerships with ADT, Samsung, and Comcast are progressing, with commercial launches expected in the near term. The ADT partnership, branded as ADT Blue, is seen as a significant growth driver. The Samsung collaboration will integrate Arlo's safety services into mobile devices, while the Comcast integration is anticipated to have a material impact starting in 2027.
The recent acquisition of Aloe Care positions Arlo to enter the rapidly growing "aging-in-place" market. CEO Matt McRae noted the market's potential to grow to nearly $300 billion by 2034 and highlighted Aloe Care's AI-enabled features, including fall prediction, as a key differentiator. The company also announced a $50 million stock buyback, signaling management's belief that the stock is undervalued.
This article is for informational purposes only and does not constitute investment advice.
