Executive Summary

Q3 2025 revenue was $139.529M, up 1.4% y/y and up 7.8% q/q, with subscriptions/services comprising 57.3% of revenue; GAAP EPS hit a record $0.07 and non-GAAP EPS was $0.16 .
Services KPIs accelerated: ARR reached $323.2M (+33.8% y/y), non-GAAP services gross margin expanded to 85.1% (+770 bps y/y), and paid accounts rose to 5.396M (+27.4% y/y) .
Against S&P Global consensus, Arlo delivered a modest beat on both revenue ($139.529M vs $138.689M*) and non-GAAP EPS ($0.16 vs $0.1482*); Q4 guidance calls for revenue of $131–$141M and non-GAAP diluted EPS of $0.13–$0.19 .
Key narrative: services-first model and AI-driven Arlo Secure 6 underpin margin expansion; near-term product gross margin remains negative due to tariffs (~$5M hit) and EOL promotions, but BOM cost reductions (20–35%) and unit growth (~29% y/y) support future service growth and profitability .

What Went Well and What Went Wrong

What Went Well

Services momentum and margin expansion: “Our ARR accelerated to $323 million, up about 34% year over year, driving non-GAAP subscriptions and services gross margin to over 85%, a record level” .
AI platform traction and KPIs: CEO highlighted Arlo Secure 6 driving ARPU “over $15 per month” and LTV “over $870,” contributing to ARR and record profitability .
Successful largest product launch in company history (100+ SKUs), with unit sales up ~29% y/y and BOM cost reductions of 20–35%, setting up Q4 POS and 2026 services growth .

What Went Wrong

Product gross margin negative: non-GAAP product GM was -17.3%, driven by the first full quarter of tariffs (~$5M impact) and EOL promotional activity; excluding tariffs, product GM would have been ~-8% .
Mixed consolidated gross margin q/q: GAAP GM fell to 40.5% from 44.9% in Q2 despite y/y improvement, reflecting tariff headwinds and planned promotions .
EMEA revenue down y/y: EMEA declined to $49.602M (35.5% mix) vs $57.773M (42.0%) a year ago as US retail/Direct strengthened and product transition timing affected regions .

Financial Results

Headline Metrics vs Prior Year and Prior Quarter

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$137.667	$129.405	$139.529
GAAP Gross Margin %	35.2%	44.9%	40.5%
Non-GAAP Gross Margin %	36.0%	45.8%	41.4%
GAAP EPS (Basic, $)	$(0.04)	$0.03	$0.07
Non-GAAP EPS (Diluted, $)	$0.11	$0.17	$0.16
Adjusted EBITDA ($USD Millions)	$11.369	$17.990	$17.082
Adjusted EBITDA Margin %	8.3%	13.9%	12.2%

Segment Breakdown

Segment Metric	Q3 2024	Q2 2025	Q3 2025
Subscriptions & Services Revenue ($USD Millions)	$61.883	$78.175	$79.942
Products Revenue ($USD Millions)	$75.784	$51.230	$59.587
Services GAAP Gross Margin %	76.7%	84.3%	84.5%
Services Non-GAAP Gross Margin %	77.4%	84.9%	85.1%
Products GAAP Gross Margin %	1.3%	-15.4%	-18.5%
Products Non-GAAP Gross Margin %	2.2%	-13.8%	-17.3%

Revenue by Geography

Geography	Q3 2024 ($M, %)	Q2 2025 ($M, %)	Q3 2025 ($M, %)
Americas	$73.303, 53.2%	$81.902, 63.3%	$83.831, 60.1%
EMEA	$57.773, 42.0%	$43.320, 33.5%	$49.602, 35.5%
APAC	$6.591, 4.8%	$4.183, 3.2%	$6.096, 4.4%
Total	$137.667, 100.0%	$129.405, 100.0%	$139.529, 100.0%

KPIs

KPI	Q3 2024	Q2 2025	Q3 2025
ARR ($USD Millions)	$241.572	$315.655	$323.150
Cumulative Paid Accounts (Millions)	4.235	5.115	5.396
Cash + ST Investments ($USD Millions)	$146.574	$160.401	$165.544
DSO (Days)	45	43	50
Inventory Turns (x)	5.8	7.7	6.4
Deferred Revenue ($USD Millions)	$24.827	$42.544	$40.515
Free Cash Flow ($USD Millions)	$17.405	$5.855	$14.984

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance / Actual	Change
Revenue ($M)	Q4 2025	N/A	$131–$141	Initiated
Non-GAAP EPS (Diluted, $)	Q4 2025	N/A	$0.13–$0.19	Initiated
GAAP EPS (Diluted, $)	Q4 2025	N/A	$0.00–$0.06	Initiated
Revenue ($M)	Q3 2025	$133–$143	$139.529	Met within range
Non-GAAP EPS (Diluted, $)	Q3 2025	$0.12–$0.18	$0.16	Met midpoint
Subscriptions & Services Revenue ($M)	FY 2025	~$300	~$310	Raised

Note: Guidance excludes unknown late-quarter items; outlook includes estimated tariff impact .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
AI/technology initiatives	Launched Arlo Secure 6 with new AI features in Q1 ; “driving growth” in Q2	ARPU >$15/month; LTV >$870; services GM >85%	Improving
Supply chain/logistics	Preparation for updated product line in 2025	Executed largest product launch amid shipping/weather disruptions; on-time load-in	Improving
Tariffs/macro	Tariff risk reiterated	First full quarter tariff impact (~$5M) depressing product GM ; tariff risk reiterated	Headwind persists
Product performance	Q1 set-up for updated line ; Q2 ASP declines/promos	Unit sales +~29% y/y; BOM -20–35%; negative product GM by design to drive subs	Mixed (volume up, margin pressured)
Regional trends	EMEA mix high historically	Americas 60.1%, EMEA 35.5%; EMEA down y/y ; international revenue 42%	US strength; EMEA softer
Strategic partnerships	ADT announced as strategic partner (Q2)	Verisure IPO/ADT Mexico; Allstate deployments; ADT testing; more partnerships expected	Expanding
R&D execution	Elevated investment; go-to-market leverage (Q2)	Continued investment supporting Secure 6 and product launches; R&D $18.1M	Sustained investment

Management Commentary

CEO: “Our ARR accelerated to $323 million, up about 34% year over year, driving non-GAAP subscriptions and services gross margin to over 85%... The comprehensive launch of our refreshed product portfolio, coupled with our Arlo Secure 6 AI-driven security platform, positions us well for a successful holiday season” .
CEO: “There are very few companies... that can excel in both software service and hardware device segments... Adjusted EBITDA was up 50% year over year and reached $17 million. GAAP EPS was $0.07, a new record” .
CFO: “Non-GAAP subscriptions and services gross margin was 85%... Product gross margins were negative... full quarter impact of tariffs approximating $5 million... and planned promotional spend on EOL products” .
CEO: Long-range plan targets: “10 million paid accounts, $700 million in ARR, and operating income over 25%” with ~60% of incremental growth expected from strategic accounts .

Q&A Highlights

Product margin bridge and BOM: Non-GAAP product GM -17.3%; excluding tariffs (~$5M) ~-8%; EOL promotions weighed on margins as inventory cleared for next-gen portfolio .
Partnerships: Verisure’s ADT Mexico acquisition opens Latin America; Arlo is exclusive provider of certain back-end services and custom cameras; ADT testing underway with potential material impact; more sizable partnerships expected by Q1/Q2 next year .
Sell-through and shipments: POS units +~29% y/y; forecast 20–30% POS growth in Q4; seasonality plus exceptional execution drove strong Q3 shipments; no pull-forward from Q4 .
Retail channels: Wider Walmart shelf share (from ~4–5 SKUs to ~9), gaining share at Amazon; positioning for competitive holiday quarter to drive household formation and future service revenue .

Estimates Context

Q3 2025 Actual vs Consensus (S&P Global)

Metric	Actual	Consensus*	Δ
Revenue ($USD Millions)	$139.529	$138.689*	+$0.840M (beat)*
Non-GAAP EPS (Diluted, $)	$0.16	$0.1482*	+$0.0118 (beat)*

Q4 2025 Guidance vs Consensus (S&P Global)

Metric	Guidance (Midpoint)	Consensus*	Context
Revenue ($USD Millions)	$136 (mid of $131–$141)	$135.5738*	In-line*
Non-GAAP EPS (Diluted, $)	$0.16 (mid of $0.13–$0.19)	$0.1642*	In-line to slight downside*

Values retrieved from S&P Global.*

Implications: modest Q3 beat supports estimate stability; Q4 guide in-line suggests limited near-term estimate volatility, with mix shift and tariff headwinds as swing factors .

Key Takeaways for Investors

Services-led model is driving durable margin expansion: non-GAAP services GM at 85.1% and ARR at $323.2M underpin earnings quality and cash generation .
Short-term GM pressure from tariffs and EOL promotions is a tactical choice to accelerate household formation; excluding tariffs, product GM improves materially (to ~-8%) .
Product refresh (20–35% BOM reductions) plus broader retail shelf space should sustain 20–30% POS unit growth into Q4, setting up 2026 services growth .
Strategic accounts are a major growth lever (Verisure/ADT/Allstate), with additional partnerships likely in the next 1–2 quarters; management expects ~60% of incremental growth from strategics .
Q3 performance was within prior guidance ranges; Q4 revenue/EPS guidance is in-line with consensus, reducing near-term estimate risk while highlighting execution on services mix .
Watch EMEA softness and rising DSOs (50 days) as potential working capital and regional demand signals; inventory turns remain healthy at 6.4x .
Management raised FY services revenue guide from ~$300M to ~$310M, reflecting stronger sell-through and subscription uptake, supportive of continued non-GAAP EPS outperformance .


## Additional Detail and Cross-References
- Q3 revenue mix: Subscriptions/services $79.942M (57.3%), Products $59.587M **[1736946_0001736946-25-000040_arloearningsrelease20251106.htm:8]**.  
- Consolidated GAAP GM declined q/q (40.5% vs 44.9%), but improved y/y (+530 bps), consistent with services margin expansion and product transition dynamics **[1736946_0001736946-25-000040_arloearningsrelease20251106.htm:8]** **[1736946_0001736946-25-000030_arloearningsrelease20250807.htm:8]**.  
- Free cash flow was $14.984M in Q3; YTD FCF $48.956M with ~12.6% FCF margin **[1736946_0001736946-25-000040_arloearningsrelease20251106.htm:11]** **[1736946_0001736946-25-000040_arloearningsrelease20251106.htm:0]**.  
- Cash and ST investments increased to $165.544M (+$19M y/y) **[1736946_0001736946-25-000040_arloearningsrelease20251106.htm:12]** **[0001736946_2246271_4]**.

Arlo Technologies, Inc. (ARLO)·Q3 2025 Earnings Summary