Arlo Technologies Inc. reported fourth‑quarter 2025 results that exceeded expectations, with total revenue of $141.3 million, a 16% year‑over‑year increase, and adjusted earnings per share of 22 cents versus the consensus estimate of 16 cents. The earnings beat was driven by a robust performance in the company’s subscription and services business, which contributed the majority of the revenue growth.
Services revenue rose to $89 million, up 39% from $53 million in the same quarter a year earlier, and represented 63% of total revenue. Annual recurring revenue reached $330.5 million, a 28.4% increase from $256.5 million in Q4 2024. The higher mix of high‑margin services, combined with strong demand for new product launches, underpinned the revenue expansion.
Non‑GAAP gross margin improved to 47.8% from 46.8% in Q4 2024, while services gross margin stood at 84% versus 84.5% in the prior year. The margin expansion reflects the company’s successful shift toward a subscription‑first model, which delivers higher pricing power and lower variable costs compared with legacy hardware sales.
Management guided for Q1 2026 revenue of $135 million to $145 million and adjusted EPS of 17 cents to 23 cents, both above analyst expectations. The guidance signals confidence in continued demand for the company’s services portfolio and the ability to maintain margin expansion as revenue scales.
"Arlo's subscription services strategy delivered blockbuster results in 2025 generating record levels of subscription revenue and profitability with nearly 30% growth in ARR and subscriptions and services revenue, as well as a 750‑basis point improvement in non‑GAAP consolidated gross margin for the full year. That success translated into tremendous Adjusted EBITDA growth of over 85% and an Adjusted EBITDA margin of 14% for the full year." – CEO Matthew McRae
"Total revenue came in at $141 million, slightly above the high end of our guidance range and fueled by our product launches and impressive performance across our services business. In fact, service revenue hit $89 million, representing 63% of total revenue and grew at an astounding 39% year over year." – Earnings Call Transcript
"All of the variables that drive our outstanding unit economics have improved, resulting in significant growth in our LTV to over $900. Non‑GAAP gross profit for the fourth quarter was $67.6 million, resulting in non‑GAAP gross margin of 47.8%, up an outstanding 48% on an absolute dollar basis when compared to the same period last year. This trend was driven by the larger percentage of total revenue coming from subscriptions and services in Q4." – Earnings Call Transcript
"And we are excited to announce a partnership with Comcast to provide connected home security solutions to millions of its Xfinity Internet households in the United States. As you can see from the caliber of our strategic relationships, Arlo is the preferred partner in the smart security space and these deals will accelerate our momentum towards achieving our long‑range targets." – CEO Matthew McRae
Investors responded positively to the results, citing the strong earnings beat and upbeat guidance as evidence of the company’s effective execution of its hardware‑to‑software transformation. Headwinds noted by management include ongoing tariff uncertainties and the inclusion of lower‑margin NRE revenue in the quarter, which the company is addressing through cost controls and pricing adjustments.
Arlo’s long‑term trajectory remains on track, with 5.7 million paid accounts—up 23.7% year‑over‑year—an average revenue per user of $15.30, and a Rule of 40 score of 45. The company is targeting 10 million paid accounts and $700 million in ARR, positioning it for continued growth in the smart home security market.
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