Arlo Technologies Q2 Earnings Call Highlights

Arlo Technologies Q2 Earnings Call Highlights

Key Points Record Q2 performance: Revenue rose 21% year over year to $155.9 million, while subscriptions and services revenue increased 19% to $93 million. Arlo added 298,000 paid accounts, reaching 6.3 million, and annual recurring revenue grew 16% to $365 million.

Profitability improved, but tariff refunds helped: Adjusted EBITDA increased 70% to $30.6 million, and consolidated non-GAAP gross margin reached a record 50% plus. However, $8 million in tariff refunds boosted product gross margin and contributed approximately $0.07 to adjusted EPS.

2026 outlook raised: Arlo now expects full-year revenue of $580 million to $600 million and non-GAAP EPS of $0.90 to $1.00. Growth plans include the September launch of higher-priced Secure 7 services, expanding partnerships with ADT and Comcast, Aloe Care market tests, and additional share repurchases.

Arlo Technologies NYSE: ARLO reported record second-quarter results, citing growth in subscription services, paid accounts and total revenue as the company raised its full-year 2026 outlook. Chief Executive Officer Matt McRae said service revenue, total revenue, gross profit and non-GAAP net income all reached company records during the quarter. Total revenue rose 21% year over year to $155.9 million, while subscriptions and services revenue increased 19% to $93 million and represented 60% of total sales.

The company added 298,000 paid accounts during the period, bringing its paid-account base to 6.3 million. McRae said point-of-sale unit volume across retail and direct channels increased 8% during the quarter, while the quality of the paid subscriber portfolio improved through higher average revenue per user, lower churn and stronger-than-forecast subscription renewals. Arlo said the lifetime value of a paid account reached $967, up 15% from a year earlier. Annual recurring revenue grew 16% year over year to $365 million, supported by subscriber growth and a slight increase in ARPU.

Profitability and tariff refund impact Chief Financial Officer and Chief Operating Officer Kurt Binder said non-GAAP subscriptions and services gross margin was 84.1% in the quarter. Product gross margin was 1%, compared with negative 13.8% in the prior-year period, aided by approximately $8 million in tariff refunds recorded during the quarter and a higher mix of strategic-partner product sales. Excluding the tariff refunds, Binder said product gross margin would have been negative 11.6%, an improvement of 220 basis points from a year earlier. Consolidated non-GAAP gross margin exceeded 50%, rising 480 basis points year over year to a company record. Non-GAAP operating expenses increased 16.5% to $48.6 million, driven by research and development investment, platform work for strategic partners and professional-services costs tied to growth initiatives. Adjusted EBITDA rose 70% from a year earlier to $30.6 million, representing a 20% margin. Non-GAAP earnings per diluted share were $0.28, including a $0.07 favorable impact from tariff refunds. On a pro forma basis excluding those refunds, Binder said non-GAAP EPS would have been $0.21, above the midpoint of the company’s guidance range and consensus estimates.

Arlo ended the quarter with $141 million in cash equivalents and short-term investments. During the first six months of 2026, the company generated $33.9 million in free cash flow, equal to an 11% free-cash-flow margin.

Products, subscriptions and channel activity Product revenue rose 23% year over year to $62.9 million. Binder attributed the increase to international growth and retail-channel shipments ahead of Amazon Prime Day, which occurred in late in the...