Executive Summary

Q3 2025 delivered above-expectation topline and profitability: total revenue $256.4M (+6.6% YoY) and non-GAAP diluted EPS $0.76; management explicitly stated the quarter exceeded internal expectations and consensus, driven by EnergyHub strength and improving SaaS mix .
Wall Street consensus was surpassed: revenue $256.4M vs $251.1M consensus (+$5.3M), non-GAAP EPS $0.76 vs $0.61 consensus (+$0.15). Management raised full-year guidance across SaaS & license, total revenue, adjusted EBITDA, and non-GAAP EPS * * *.
Mix shift to SaaS expanded total gross margin ~100 bps YoY; hardware margin compressed short term on reciprocal tariff pass-through timing and expedited shipping for new video launches (V516/V730), with normalization expected in Jan 2026 when tariff fees are modified .
Catalysts: raised FY25 guide, preliminary FY26 outlook (SaaS $722–$724M; adj. EBITDA $210–$212M), accelerating AI-enabled video portfolio and Tesla EV integration at EnergyHub; near-term watch items include Q4 seasonality in EnergyHub and tariff dynamics .

What Went Well and What Went Wrong

What Went Well

“We are pleased to report financial results for the third quarter that were above our expectations.” Strength was broad-based with particular outperformance at EnergyHub .
SaaS & license revenue rose 10.1% YoY to $175.4M; adjusted EBITDA rose 18.4% YoY to $59.2M, reflecting favorable mix and operating efficiency improvements .
Platform innovation: launch of ADC‑V730 spotlight camera with AI deterrence and proactive monitoring, plus expanded third‑party camera support and AI‑augmented technician chatbot (inquiries +2.5x; CSAT +70%) enhancing partner enablement and monetization .

What Went Wrong

Hardware margin headwinds from reciprocal tariffs and expedited shipping for V516/V730 launches pressured hardware gross margin in Q3 and likely into Q4 before normalizing in January 2026 .
Cash generation YTD moderated: operating cash flow $117.4M vs $150.2M prior year; non‑GAAP FCF $102.0M vs $142.3M prior year (nine months), reflecting higher investment and working capital dynamics .
International remains the laggard among growth initiatives; management noted slower progress relative to commercial and EnergyHub, though revenue contribution has improved from ~4% to ~6% over two years .

Financial Results

Quarterly Comparisons (oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
Total Revenue ($USD Millions)	$238.8	$254.3	$256.4
SaaS & License Revenue ($USD Millions)	$163.8	$170.0	$175.4
Hardware & Other Revenue ($USD Millions)	$75.0	$84.3	$81.0
GAAP Diluted EPS ($)	$0.52	$0.63	$0.65
Non-GAAP Diluted EPS ($)	$0.54	$0.58	$0.76
Adjusted EBITDA ($USD Millions, non-GAAP)	$43.5	$48.4	$59.2

Year-over-Year (Q3 2025 vs Q3 2024)

Metric	Q3 2024	Q3 2025
Total Revenue ($USD Millions)	$240.5	$256.4
SaaS & License Revenue ($USD Millions)	$159.3	$175.4
GAAP Diluted EPS ($)	$0.67	$0.65
Non-GAAP Diluted EPS ($)	$0.62	$0.76
Adjusted EBITDA ($USD Millions, non-GAAP)	$50.0	$59.2

Segment Breakdown (oldest → newest)

Segment Revenue ($USD Millions)	Q1 2025	Q2 2025	Q3 2025
SaaS & License	$163.8	$170.0	$175.4
Hardware & Other	$75.0	$84.3	$81.0
Total	$238.8	$254.3	$256.4

KPIs and Margins

KPI / Margin	Q1 2025	Q2 2025	Q3 2025
Gross Profit ($USD Millions)	$160.6 (calc. from Rev–COGS)	$166.8 (calc. from Rev–COGS)	$168.8
Total Gross Margin (%)	67.3% (calc.)	65.6% (calc.)	65.9% (calc.)
Adjusted EBITDA Margin (%)	18.2% (calc.)	19.0% (calc.)	23.1% (calc.)
Renewal Rate (%)	N/A	N/A	~94% (rounded)
Growth Initiatives Share of SaaS (%)	N/A	N/A	~30%
Commercial Access Control Subscriber Growth (%)	N/A	N/A	~30% increase

Note: “calc.” denotes values computed using cited revenue and cost metrics.

Guidance Changes

Metric	Period	Previous Guidance (as of Q2)	Current Guidance (as of Q3)	Change
SaaS & License Revenue ($M)	FY 2025	$681.0–$681.4	$685.2–$685.4	Raised
Total Revenue ($M)	FY 2025	$990.0–$996.4	~$1,000.0	Raised
Hardware & Other Revenue ($M)	FY 2025	$309.0–$315.0	$315.0–$316.0	Raised
Adjusted EBITDA ($M, non-GAAP)	FY 2025	$195.0–$196.5	$199.0	Raised
Non-GAAP Adjusted Net Income ($M)	FY 2025	$136.0–$136.5	$140.5	Raised
Non-GAAP Diluted EPS ($)	FY 2025	$2.40 (based on 60.3M diluted shares)	$2.53 (based on 58.9M diluted shares)	Raised
Weighted Avg Diluted Shares (M)	FY 2025	60.3	58.9	Lower (convert settlement method locked; fewer dilutive shares)
SaaS & License Revenue ($M)	Q4 2025	N/A	$176.0–$176.2	—

Earnings Call Themes & Trends

Topic	Q1 2025 (Previous Mentions)	Q2 2025 (Previous Mentions)	Q3 2025 (Current Period)	Trend
AI/Video product innovation	Launched ADC‑V516; AID voice upgrades; Smart Signal to RVM	OpenEye AI search tools; T25 thermostat	ADC‑V730 spotlight camera; AI deterrence; expanded third‑party camera support; AI chatbot adoption and CSAT up	Expanding and commercializing across portfolio
Supply chain/tariffs	Not highlighted	Not highlighted	Hardware margin compression from reciprocal tariffs and expedited shipping; normalization expected Jan 2026	Transitional headwind Q3–Q4
Macroe/Housing	Not highlighted	Not highlighted	Housing/macros kept gross adds steady; renewal ~94%	Neutral sequentially
EnergyHub/EV integrations	GM integration into EnergyHub	Not highlighted	Tesla Wall Connector integration; strong program execution; minor Q4 settlement pull-forward	Durable growth vector
International expansion	Not highlighted	Not highlighted	Lagging vs other initiatives; revenue mix improved from ~4% to ~6% over two years	Gradual progress
Regulatory/tax	Not highlighted	Not highlighted	R&D expensing restored; ~$200M 5-year cash tax tailwind vs prior law	Positive cash flow driver
Capital allocation/EBITDA	Not highlighted	Not highlighted	Midterm target: adj. EBITDA margin ~21% by 2027; buybacks opportunistic	Margin expansion with reinvestment

Management Commentary

CEO: “We are pleased to report financial results for the third quarter that were above our expectations… with particular strength in our energy business.” Emphasis on durable positions in residential/commercial security and energy management .
President, Platform: “Capabilities like AI deterrence and remote video monitoring reflect our strategy to evolve video cameras from passive sensors into active responsive devices that drive higher recurring revenue and subscriber lifetime value.” .
CFO: “Total gross margins increased 100 basis points year-over-year… even with temporary hardware margin headwinds from reciprocal tariffs and expedited shipping… Adjusted EBITDA grew 18.4% YoY to $59.2M.” .
CFO on capital allocation: aiming for adjusted EBITDA margins in the ~21% range by 2027, complemented by organic reinvestment; buyback activity opportunistic .

Q&A Highlights

2026 framework: initial SaaS growth ~6% with potential upside similar to FY25 trajectory; growth initiatives expected to maintain 20–25% YoY .
Balance of growth vs profitability: focus remains on multi-year growth vectors with ongoing efficiency improvements; midterm adj. EBITDA margin target reiterated .
EnergyHub momentum: secular tailwinds from electrification and data centers; durable growth with headroom in thermostats (3–5% penetration) and expansion into EVs/batteries; minor Q4 settlement pull-forward in Q3 (hundreds of thousands) .
International: acknowledged laggard status vs other initiatives; mix improved to ~6%; management optimistic on acceleration .
Renewals/gross adds: renewal ~94% (rounded); gross adds consistent with Q2 given housing backdrop .

Estimates Context

Period	Metric	Actual	S&P Global Consensus	Surprise
Q3 2025	Revenue ($USD Millions)	$256.4	$251.1*	+$5.3M
Q3 2025	Non-GAAP Diluted EPS ($)	$0.76	$0.61*	+$0.15
Q2 2025	Revenue ($USD Millions)	$254.3	$244.0*	+$10.3M
Q2 2025	Non-GAAP Diluted EPS ($)	$0.58	$0.51*	+$0.07

Values marked with * were retrieved from S&P Global. Note: S&P’s EBITDA definitions may differ from company-reported “non-GAAP adjusted EBITDA,” so EBITDA comparisons are not shown to avoid mixing bases *.

Where estimates likely to adjust: upward revisions to FY25/FY26 models for SaaS, total revenue, and adj. EBITDA given the guide raise and EnergyHub momentum; near-term hardware margin assumptions should reflect tariff normalization in Jan 2026 and Q4 seasonality in EnergyHub .

Key Takeaways for Investors

Q3 was a clean beat with non-GAAP EPS and revenue above consensus; FY25 guide raised across all major metrics, supporting near-term sentiment * * *.
Mix shift towards SaaS is expanding margins; temporary hardware margin pressure should fade post tariff pass-through modification in Jan 2026, offering further gross margin stability .
EnergyHub is a durable growth engine with new EV integrations (Tesla) and multi-vector runway (thermostats, EVs, batteries, utility sign-ups), underpinning SaaS trajectory into 2026 .
AI-enabled video roadmap (V516/V730, remote monitoring, deterrence) enhances monetization and retention; international remains a call option with incremental contribution .
Cash generation remains strong despite YTD moderation; R&D expensing change provides multi-year cash tax tailwind, strengthening capital allocation flexibility (organic reinvestment, opportunistic buybacks) .
Trading lens: watch Q4 EnergyHub seasonality, tariff normalization timing, and any incremental guide updates; narrative catalysts include continued AI product launches and early FY26 guidance formalization .
Medium-term thesis: recurring SaaS scale, EnergyHub structural tailwinds, and disciplined reinvestment support revenue growth with margin expansion toward ~21% adj. EBITDA by 2027 .

Footnotes: All company results and guidance figures are sourced from ALRM’s Q3 2025 8‑K/press release and earnings call transcripts. S&P Global consensus data marked with *; Values retrieved from S&P Global.

Alarm.com Holdings, Inc. (ALRM)·Q3 2025 Earnings Summary