GET DAILY SIGNALSArlo Technologies (ARLO) Beats Q3 Estimates on Subscription Growth, Shares Fall -8%
Key Takeaways
- Arlo Technologies reported third quarter 2026 revenue of $149.2 million, up 6.9% year over year and above the analyst consensus estimate of roughly $144.9 million.
- Subscriptions and services revenue reached a record $96.0 million, growing about 20% year over year and making up roughly 64% of total revenue.
- Non-GAAP (adjusted) earnings per share came in at $0.24, exceeding the consensus estimate of about $0.20, while GAAP diluted EPS was $0.01.
- Adjusted EBITDA rose about 58% year over year to $26.9 million, an 18% margin.
- Annual recurring revenue climbed 14.5% to $369.9 million, supported by 6.6 million paid accounts, up 23.1% year over year.
- Despite the beats, shares fell about 8% after the report, underscoring how high investor expectations had become.
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Why This Quarter Matters for Arlo's Transition
Arlo Technologies is a smart home security company in the middle of a strategic pivot toward recurring subscription revenue, and its third quarter report offered a clear read on whether that transition is translating into durable profitability. Subscription and services revenue now accounts for nearly two-thirds of total sales, and its growth is the key driver behind expanding gross margins and a sharply higher adjusted EBITDA. I’m watching paid account growth, annual recurring revenue, and average revenue per user closely because these metrics reveal the health of the company's recurring model as hardware demand normalizes. With strategic partnerships, an AI-enabled product roadmap, and a newly authorized buyback in the picture, this quarter is a milestone for judging the company's long-term earnings trajectory. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
What the Numbers Actually Show
For the third quarter ended September 27, 2026, Arlo Technologies posted total revenue of $149.2 million, up 6.9% from $139.5 million a year earlier and above the consensus estimate of about $144.9 million. Subscriptions and services revenue set a record at $96.0 million, up roughly 20% year over year, while product revenue declined to $53.1 million from $59.6 million in the prior-year period.
On profitability, non-GAAP diluted EPS came in at $0.24, well above the consensus estimate of approximately $0.20. GAAP diluted EPS was $0.01. Non-GAAP gross margin improved 760 basis points year over year to 49.0%, while adjusted EBITDA grew about 58% to $26.9 million, an 18% margin. Annual recurring revenue reached $369.9 million, up 14.5%, supported by 6.6 million paid accounts, up 23.1%.
Management issued fourth quarter guidance calling for revenue of roughly $142 million and non-GAAP EPS of about $0.20 at the midpoint, both modestly above consensus at the time.
How Investors Reacted to the Results
Arlo's results beat headline expectations on revenue, adjusted EPS, and adjusted EBITDA, yet the stock declined roughly 8% immediately after the release. The drop highlights how elevated sentiment had become after a string of strong quarters, leaving little room for disappointment. Investors appeared to focus on the sequential decline in product revenue, down from $62.9 million in the second quarter, as well as the GAAP earnings picture, where a GAAP diluted EPS of $0.01 landed below some estimates. The services-led mix shift is boosting margins, but softer hardware sales remain a watchpoint because device sales help feed the subscription funnel over time.
Key Factors to Monitor Ahead
The recurring revenue story remains the central theme. Management pointed to longer-term initiatives, including its Comcast integration targeting an early 2027 launch, as a foundation for future growth, and executives signaled a target of roughly 30% annual recurring revenue growth in 2027. Investors should monitor whether paid account growth, which rose 23.1% this quarter, can be sustained as promotional activity and retail channel dynamics shift.
Margin trends are another key area. Non-GAAP gross margin of 49.0% and adjusted EBITDA margin of 18.0% reflect the benefits of a higher-margin subscription mix, but operating expenses are also rising to support strategic partners and product launches such as Arlo Secure 7 with AI-enabled Threat Assessment. Watching the balance between investment and profitability will be important in coming quarters.
Finally, the newly authorized $100 million share repurchase program adds a capital allocation dimension to the story. How management deploys that buyback, alongside the ramp of new partnerships and the evolution of hardware demand, will shape investor expectations heading into the year-end report, when the company plans to detail its 2027 operating plan.
My Take on Using Tickeron’s AI Screener
When reviewing earnings like these, I often turn to Tickeron’s AI Screener to quickly filter peers and spot patterns in recurring-revenue names. It helps surface comparable ideas based on fundamentals and technical signals without spending hours on manual screens. The tool has become a regular part of how I cross-check sector trends and identify potential follow-ups after a report like this one.
Disclaimer
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Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
ARLO sees its 50-day moving average cross bearishly below its 200-day moving average
The 50-day moving average for ARLO moved below the 200-day moving average on October 12, 2026. This could be a long-term bearish signal for the stock as the stock shifts to an downward trend.
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for ARLO moved out of overbought territory on October 30, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 33 similar instances where the indicator moved out of overbought territory. In 25 of the 33 cases, the stock moved lower in the following days. This puts the odds of a move lower at 76%.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 9 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where ARLO declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 77%.
ARLO broke above its upper Bollinger Band on October 27, 2026. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on October 21, 2026. You may want to consider a long position or call options on ARLO as a result. In 67 of 87 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are 77%.
The Moving Average Convergence Divergence (MACD) for ARLO just turned positive on October 19, 2026. Looking at past instances where ARLO's MACD turned positive, the stock continued to rise in 36 of 43 cases over the following month. The odds of a continued upward trend are 84%.
ARLO moved above its 50-day moving average on October 27, 2026 date and that indicates a change from a downward trend to an upward trend.
The 10-day moving average for ARLO crossed bullishly above the 50-day moving average on October 30, 2026. This indicates that the trend has shifted higher and could be considered a buy signal. In 13 of 16 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are 81%.
Following a +13.03% 3-day Advance, the price is estimated to grow further. Considering data from situations where ARLO advanced for three days, in 234 of 297 cases, the price rose further within the following month. The odds of a continued upward trend are 79%.
The Aroon Indicator entered an Uptrend today. In 134 of 183 cases where ARLO Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 73%.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is 44 (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is 45 (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 76, placing this stock slightly better than average.
The Tickeron Seasonality Score of 50 (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is 59 (best 1 - 100 worst), indicating steady price growth. ARLO’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of 84 (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (10.332) is normal, around the industry mean (2.990). P/E Ratio (52.483) is within average values for comparable stocks, (25.807). Projected Growth (PEG Ratio) (0.509) is also within normal values, averaging (1.215). Dividend Yield (0.000) settles around the average of (0.084) among similar stocks. P/S Ratio (2.553) is also within normal values, averaging (1.867).
The Tickeron PE Growth Rating for this company is 97 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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General Information
a manufacturer of security cameras and other smart home devices
Industry BuildingProducts
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