Arlo Technologies (NYSE:ARLO) reported fourth-quarter and full-year 2025 results that management said reflected accelerating momentum in its subscriptions and services strategy, alongside what it described as the largest product launch in company history. Executives also introduced new strategic partnerships and laid out 2026 guidance that calls for continued growth in service revenue and earnings, while noting ongoing uncertainty around tariffs.
Fourth-quarter results driven by services mix and margin expansion
CEO Matthew McRae said Arlo delivered “an incredibly strong” fourth quarter, with total revenue of $141 million, slightly above the high end of the company’s guidance. Services revenue was $89 million, representing 63% of total revenue and up 39% year-over-year, according to management. Annual recurring revenue (ARR) ended the year at $330 million, up 28% year-over-year.
Binder attributed the margin expansion largely to the increasing mix of subscription and services revenue, while also noting that product gross margins improved by roughly 300 basis points from the third quarter. He said product gross margin in Q4 was negative 14.4%, improving from around negative 17% in Q3, and reiterated that Arlo uses hardware as a customer acquisition driver for its recurring revenue business.
Key SaaS metrics: churn, ARPU, and unit economics
McRae highlighted several subscription metrics, including monthly consolidated churn of 1% in Q4, implying a 99% monthly subscriber retention rate. He also said average monthly revenue per user (ARPU) increased to $15.30 in the quarter, supported by “upward migration” to AI-driven service plans. McRae noted that these subscriptions account for 89% of ARR and generated 94% gross margin.
Management said improved churn and ARPU drove subscriber lifetime value (LTV) to $917, up 23% year-over-year, while customer acquisition cost remained stable despite the holiday quarter. McRae said Arlo’s LTV-to-CAC ratio rose to 4.0 in Q4.
Binder added that Q4 subscription and services gross margin was 84%, up 230 basis points year-over-year, and noted that approximately $4 million of Q4 services revenue came from non-recurring engineering (NRE) work for a strategic partner. He said NRE is “highly profitable” but has a slightly lower margin profile than Arlo’s core subscription revenue, and indicated similar integration-related revenue could recur as Arlo works with more large partners.
Full-year 2025: revenue, profitability, cash flow, and paid accounts
For 2025, Binder said Arlo delivered about $530 million in consolidated revenue, within the company’s initial guidance range of $510 million to $540 million. Subscriptions and services revenue totaled $316 million, or 60% of total revenue, and grew 30% year-over-year.
Profitability exceeded the company’s original outlook, Binder said, despite “macroeconomic, geopolitical, and tariff challenges.” Adjusted EBITDA was $74.7 million, up 85% year-over-year, representing a 14.1% adjusted EBITDA margin. Non-GAAP net income per diluted share was $0.70, above the company’s prior guidance of $0.56 to $0.66.
Arlo ended 2025 with 5.7 million paid accounts, up 24% year-over-year. Binder said this aligned with a 23% increase in retail point-of-sale volume following the company’s product launch in the second half of the year and continued partner contributions. He also cited gains at Walmart, and said Amazon helped generate additional paid accounts.
Free cash flow for 2025 was $66.9 million, up 38% year-over-year, for a 12.6% free cash flow margin. Arlo ended the year with $166 million in cash, cash equivalents, and short-term investments. Binder noted cash increased $15 million year-over-year even after an investment in Origin Wireless (about $12.8 million) and $45.5 million returned through share repurchases.
Product launch execution and retail positioning
McRae said Arlo deployed Arlo Secure 6 across its user base in 2025, introducing features including an “advanced multi-recognition engine,” AI-based scene descriptions, and new audio detections. He also said Arlo executed a major device launch in the second half of 2025, comprising more than 109 SKUs across channel partners, shipping more than 800,000 units in the first 60 days of production and ramping supply without creating excess inventory.
During the Q&A, McRae discussed retail dynamics and said Arlo expects to launch several new retailers over the next 12 months. He also said some retailers are evaluating shelf assortments and may consolidate brands over time. McRae further noted ongoing U.S. government activity involving investigations into certain imported camera brands from China, and said potential restrictions could open a meaningful amount of unit share in the market, which Arlo is preparing to pursue if it materializes.
Strategic partnerships, adjacencies, and 2026 outlook
Management emphasized strategic partnerships as a growing part of Arlo’s longer-term expansion. McRae said ADT’s technical integration was largely completed by the end of 2025, with planning now underway for ADT’s go-to-market, originally targeted for mid-2026. He also discussed a Samsung partnership announced at CES: SmartThings Safe Premium, powered by Arlo, which McRae described as Arlo’s first partnership “solely based on SaaS services” without reliance on Arlo hardware.
Arlo also announced a partnership with Comcast to provide connected home security solutions to Xfinity internet households. McRae said integration for a partnership of that scale typically takes nine to 12 months, with some contribution expected in 2026 and a more meaningful ramp in 2027 and beyond.
McRae also said Arlo plans to begin investing in new adjacencies, including the small business and aging-in-place markets, while continuing to innovate on its software platform (including a planned Arlo Secure 7 rollout later in 2026) and preparing a new hardware platform for 2027.
On capital allocation, McRae said Arlo repurchased more than 3.3 million shares over the last year and that the board approved an additional $50 million authorization for share repurchases. He also said Arlo expects to be more active in inorganic investment opportunities over the next year.
For guidance, Binder said Arlo expects first-quarter 2026 revenue of $135 million to $145 million, GAAP EPS of $0.01 to $0.07, and non-GAAP EPS of $0.17 to $0.23. For full-year 2026, the company guided to consolidated revenue of $550 million to $580 million, with service revenue comprising more than 65% of total revenue. Arlo expects service revenue of $375 million to $385 million and non-GAAP EPS of $0.75 to $0.85.
Binder also addressed tariff uncertainty following a Supreme Court ruling striking down tariffs put in place the prior year. He said Arlo’s outlook assumes the company remains subject to the prior 20% tariff structure due to a lack of clarity around the situation and potential recovery of previously paid tariffs.
About Arlo Technologies (NYSE:ARLO)
Arlo Technologies, Inc (NYSE: ARLO) is a provider of smart home security products and services designed for residential and small business customers. The company offers a portfolio of wireless and Wi-Fi-enabled security cameras, video doorbells, smart lighting solutions, and associated accessories. Arlo integrates advanced video analytics, motion detection, cloud storage, and two-way audio capabilities to deliver end-to-end security and monitoring solutions accessible through mobile applications and web interfaces.
Founded as a division of Netgear, Inc in 2014 and spun off as an independent public company in 2018, Arlo Technologies has established a presence in North America, Europe, Australia and parts of Asia.
