Arlo Technologies, Inc.

Arlo reported Q2 2026 total revenue of $155.9 million, up 21% year over year, with subscriptions and services revenue of $93 million, up 19% year over year and 60% of total revenue. Product revenue was $62.9 million, up from $51.2 million last year; subscriber base grew 23% year over year with 298,000 new paid accounts; ARR was $365 million, up 16% year over year. Non-GAAP subscriptions and services gross margin was 84.1%, product gross margin was 1% in the quarter (or negative 11.6% pro forma excluding tariff refunds), and consolidated non-GAAP gross margin was above 50%, up 480 basis points year over year. Adjusted EBITDA was $30.6 million, up 70% year over year, and non-GAAP EPS was $0.28, including a favorable $0.07 tariff refund impact; on a pro forma basis EPS would have been $0.21. For the first six months, Arlo generated $33.9 million in free cash flow with an 11% margin, ended with $141 million in available cash, and bought back $22 million of stock in Q2. For Q3, management guided revenue to $140 million-$150 million and non-GAAP EPS to $0.17-$0.23. For full-year 2026, guidance was raised to $580 million-$600 million in revenue and $0.90-$1.00 in non-GAAP EPS.

Matthew McRae framed the quarter as evidence that Arlo’s subscription-led model is working, citing stronger retention, higher ARPU, lower churn, and nearly 300,000 paid account additions. He said the company is now investing across organic, inorganic, and shareholder-return priorities, with Secure 7, next-generation hardware, Aloe Care, and share repurchases positioned to support growth into 2027 and beyond. His tone was notably upbeat, saying he has “never been more excited” about Arlo’s potential.

Kurt Binder focused on the financial execution behind the quarter: $93 million of subscriptions and services revenue, $155.9 million of total revenue, 84.1% subscriptions gross margin, 1% product gross margin, and over 50% consolidated non-GAAP gross margin. He said product margins were boosted by $8 million in tariff refunds and that, excluding that benefit, product gross margin would have been negative 11.6%, still improved 220 basis points year over year. He also highlighted $30.6 million of adjusted EBITDA, $33.9 million of free cash flow in the first half, $141 million of available cash, $63.6 million of accounts receivable, DSOs of 37 days, and inventory of $48.4 million. On guidance, he pointed to $140 million-$150 million of Q3 revenue, $0.17-$0.23 of Q3 EPS, and raised full-year revenue and EPS targets.

Analysts pressed on how much of the raised full-year outlook was driven by product versus services, and management said product shipments typically lead service revenue, so the top-line ramp should feed future subscription growth later in the funnel. Questions also focused on Secure 7, with management describing more advanced AI-based threat assessment, more features requested by users, and a new higher-priced tier launching in September. On partnerships, Arlo said ADT Blue is ramping, Comcast integration is on track, and additional partner announcements could follow, while Aloe Care questions drew comments about Home Helpers, AI calling/check-ins, and possible expansion into DIY and additional care channels.