GICS Sector : Industrials
Arlo Technologies, Inc., together with its subsidiaries, provides a cloud-based platform in the Americas, Europe, the Middle East, Africa, and the Asia Pacific regions.It combines an intelligent cloud infrastructure and mobile app with various smart connected devices.The company offers Arlo essential indoor camera; Arlo Go 2 LTE/Wi-Fi security camera; Arlo Q and Arlo Q Plus, an indoor wired solution that allows users to monitor their surroundings; and Arlo Go, an LTE-enabled wire-free camera that provides untethered mobile security.
Arlo Technologies reported a strong Q3 2025, with subscriptions and services revenue reaching $79.9 million, up 29% year-over-year. The company's annual recurring revenue (ARR) hit $323 million, a 34% increase from the previous year. Non-GAAP net income per diluted share came in at $0.16, beating estimates of $0.15. Gross margins also expanded, with service gross margin reaching 85%, a new record for the company. The company's focus on enhancing customer journeys and delivering a differentiated value proposition drove new paid accounts to select premium rate plans, resulting in an average revenue per user (ARPU) of over $15 per month.
Publication Date: Nov -16
The strong performance was driven by the addition of 281,000 paid accounts, resulting in a total of 5.4 million paid accounts, a 27% increase year-over-year. The company's latest AI-based security platform, Arlo Secure 6, was a key driver of this growth, with users finding substantial value in its features and capabilities. The partnership with Verisure also contributed to the growth, with the company seeing a broader opportunity to expand in Latin America.
Arlo Technologies guided Q4 consolidated revenue to be in the range of $131 million to $141 million, with non-GAAP net income per diluted share expected to be between $0.13 and $0.19. The company expects to continue leveraging its new products and competitive ASPs to drive strong POS volume and accelerate paid subscription growth. Analysts estimate revenue growth of 7.9% for next year, indicating a continued upward trajectory for the company.
Arlo Technologies' current valuation metrics indicate a premium valuation, with a P/E Ratio of 345.85 and a P/S Ratio of 2.86. The company's EV/EBITDA ratio is also high at 25513.09. However, the Free Cash Flow Yield is 3.75%, indicating a relatively attractive cash return. The ROE is 3.81%, while the ROIC is -3.0%, suggesting that the company still has room for improvement in terms of profitability.
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Arlo Technologies' Smart Connected Devices segment growth is driven by increasing adoption of IoT devices, rising demand for home security and automation, growing need for remote monitoring, and advancements in AI-powered camera technology. Additionally, the shift towards smart homes and cities, and increasing awareness of security threats are contributing to the 7% growth rate.
Arlo Technologies, Inc.'s services growth is driven by increasing demand for smart home security solutions, expansion into new markets, and strategic partnerships. The rise of IoT and AI adoption, coupled with growing concerns about home security, are also key contributors. Additionally, Arlo's innovative products and subscription-based model are attracting a growing customer base, fueling revenue growth.
Battery-powered, weather-resistant cameras that can be placed indoors or outdoors to provide a clear view of your home or business.
Indoor cameras that plug into a power outlet and provide a clear view of your home or business.
Wire-free cameras with advanced features like weather resistance, night vision, and motion detection.
A smart doorbell with a built-in speaker and microphone that allows for two-way audio communication.
Wireless, motion-sensing lights that can be placed indoors or outdoors to provide additional security and illumination.
A central hub that connects and manages all Arlo devices, providing a single point of control and monitoring.
Arlo Technologies, Inc. faces moderate threat from substitutes as there are alternative security camera solutions available in the market, but the company's innovative products and strong brand reputation help to mitigate this threat.
Arlo Technologies, Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products are designed to be user-friendly, making it easy for customers to use and maintain, reducing their bargaining power.
Arlo Technologies, Inc. relies on a few key suppliers for components and manufacturing, which gives them some bargaining power. However, the company's strong relationships with suppliers and its ability to negotiate prices help to mitigate this threat.
The security camera market is highly competitive, and new entrants can easily enter the market with innovative products, posing a significant threat to Arlo Technologies, Inc. The company needs to continuously innovate and improve its products to stay ahead of the competition.
The security camera market is highly competitive, with many established players and new entrants vying for market share. Arlo Technologies, Inc. faces intense rivalry from competitors, which can lead to pricing pressure and reduced market share if the company is not able to differentiate its products and services.
| Value | |
|---|---|
| Debt Weight | 17.05% |
| Debt Cost | 3.95% |
| Equity Weight | 82.95% |
| Equity Cost | 13.31% |
| WACC | 11.71% |
| Leverage | 20.56% |
Value: 1.2
Growth: 8.8
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Yield: 1.0
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