Arlo Technologies — Second Quarter 2026 Earnings Summary

Financial Performance

• Total revenue reached a record $156 million, a 21% year-over-year increase.
• Subscriptions and services revenue hit a record $93 million, growing 19% year-over-year and representing 59.7% of total revenue.
• GAAP gross margin was 48.2% (up 330 basis points year-over-year), while non-GAAP gross margin reached a record 50.6% (up 480 basis points year-over-year).
• Subscriptions and services gross margins were 81.1% (GAAP) and 84.1% (non-GAAP).
• GAAP net income was $3 million; non-GAAP net income was $31.1 million.
• Adjusted EBITDA reached a record $30.6 million, up 70.3% year-over-year, with an adjusted EBITDA margin of 19.6%.
• GAAP EPS was $0.03; non-GAAP EPS was $0.28, which includes a $0.07 impact from a tariff refund.
• Cumulative paid accounts grew 23.2% year-over-year to 6.3 million.
• Annual recurring revenue (ARR) was $365.0 million, up 15.6% year-over-year.
• Free cash flow for the first half of 2026 was $33.9 million, with a margin of 11.1%.
• Cash, cash equivalents, and short-term investments totaled $141.1 million as of June 28, 2026.
• Deferred revenue (current and non-current) was $51.8 million as of June 28, 2026.

Guidance and Future Outlook

• The company increased its full-year 2026 guidance for total revenue to a range of $580 million to $600 million.
• Full-year 2026 non-GAAP EPS guidance was increased to a range of $0.90 to $1.00.
• Third quarter 2026 revenue guidance is $140 million to $150 million.
• Third quarter 2026 non-GAAP EPS guidance is $0.17 to $0.23.
• The non-GAAP EPS outlook includes an expected tariff refund, which management expects to reinvest in growth initiatives for the subscriptions and services business.
• Management noted that the global tariff environment remains uncertain, with potential impacts on product costs and margins due to manufacturing outside the U.S.

Business Segments and Product Lines

• Subscriptions and services revenue grew 19% year-over-year to $93 million.
• Product revenue was $62.9 million for the quarter.
• Geographic revenue breakdown for the quarter: Americas ($89.0 million, 57.1%), EMEA ($61.5 million, 39.4%), and APAC ($5.5 million, 3.5%).
• Announced an expanded partnership between Aloe Care Health and Home Helpers Home Care to deploy a new AI-powered wellness service.
• Recognized by Newsweek as one of the Most Trustworthy Companies in America for 2026 in the Appliances and Electronics Category.

Market and Competitive Landscape

• The company highlighted continued strength in subscriptions and services revenue as a driver for top and bottom-line growth.
• The Arlo brand gained further recognition as a trusted technology brand for safety and security solutions among strategic partners.
• The press release notes that ongoing uncertainty regarding trade disputes and political tensions between the U.S. and other countries, including in Asia, may exacerbate unfavorable macroeconomic conditions and impact international customer demand.

Risks and Challenges

• Tariffs and retaliatory tariffs have created a dynamic and unpredictable trade landscape, increasing product costs for items manufactured outside the U.S.
• Trade restrictions could negatively impact the ability to obtain finished products from ex-U.S. manufacturers, potentially delaying deliveries.
• Tariff-related cost pressures and supply chain disruptions could lead to reputational harm if products are not delivered on time or if price increases are poorly received.
• Risks include future demand being lower than anticipated due to inflation, fluctuating consumer confidence, banking failures, and high interest rates.
• Potential risks include unsuccessful development of sales and marketing capabilities, failure to increase paid subscription sales, and failure to successfully integrate acquired businesses or realize anticipated synergies.

Management Commentary and Tone

• Matthew McRae, CEO, described the financial results as "outstanding," citing record total revenue and adjusted EBITDA.
• Management characterized operational execution as "best-in-class."
• The CEO attributed growth to "exceptional user experience and trusted lifelong customer relationships" acting as catalysts for strategic partners.
• The tone is confident, emphasizing the strength of the subscription business and the brand's recognition.

Other Key Points

• The company repurchased $22 million of common stock during the second quarter, part of a $50 million authorized stock repurchase program.
• Acquired Aloe Care Health, with cash outflows for the acquisition and stock repurchases impacting the cash balance.
• Headcount was 384 as of June 28, 2026.
• Inventory turns were 5.2 for the quarter ended June 28, 2026.
• Days sales outstanding (DSO) were 37 days as of June 28, 2026.