| Factor | Score | Distribution | Value | Avg | Rank |
|---|---|---|---|---|---|
Valuation | 34 | 47.1x | 17.8x | Bottom tier | |
Growth | 80 | 15.6% | 7.1% | Top tier | |
Quality | 86 | 9.2% | 4.5% | Top tier | |
Safety | 74 | — | 2.6x | Top tier | |
Capital Return | 74 | — | 2.12% | Top tier | |
Momentum | 43 | -10.4% | 2.9% | Around median | |
Sentiment | 35 | 4 | 3 | Bottom tier |
Estimates — analyst targets and a simplified DCF, not investment advice.
Ten ratios that matter, each compared against its sector median and average — so you can see whether a number is rich or cheap relative to peers in the same sector.
Arlo Technologies sells smart home security devices, then converts installed devices into paid accounts for monitoring, artificial intelligence, and recording services. The economic model relies on using sales of cameras and Arlo Pro and Arlo Ultra products to acquire households, then generating recurring revenue from Arlo Secure subscriptions and services such as continuous video recording, professional monitoring, cellular connectivity, and battery backup. The company is also expanding its reach through partnerships with ADT, Comcast, and Samsung, and through Aloe Care in the senior care and aging-in-place market.
In Q2 of fiscal year 2026, Arlo recorded record revenue of $155.9 million, up 21% year over year. Subscription and services revenue reached $93 million, up 19%, and accounted for 60% of the total, while product revenue reached $62.9 million, up 23% from $51.2 million. The company added 298 thousand paid accounts, bringing the total to 6.3 million accounts, and annual recurring revenue rose to $365 million, up 16%.
Consolidated adjusted gross margin exceeded 50%, rising 480 basis points year over year, supported by an 84.1% subscription and services margin and an $8 million tariff refund. Adjusted product margin was 1%, but was negative 11.6% excluding the tariff refund. Adjusted earnings before interest, taxes, depreciation, and amortization reached $30.6 million, up 70%, with a 20% margin, and non-GAAP net income was $0.28 per diluted share, or $0.21 after excluding the positive impact of the tariff refund. At the end of the quarter, the company held $141 million in cash and cash equivalents and short-term investments, and generated $33.9 million in free cash flow during the six months ended June 28, 2026.
Automated analysis for informational purposes only — not investment advice.
The analysts' average price target is $18.67, within a range of $17 to $20, with a consensus Buy rating; the average is below and only slightly removed from the 52-week range high of $19.94, while the highest target nearly matches that high. No price-to-earnings ratio is available in the data, so the valuation rests on Arlo's ability to convert device growth into subscriptions with an 84.1% margin, balanced against negative product margins, the non-recurring impact of tariff refunds, and the stock's wide 52-week range of $11.05 to $19.94.
Figures in the text are as of 2026-09-01; the live price is shown at the top of the page.
Revenue rose 21% year over year to a record $155.9 million. Subscriptions and services recorded $93 million, up 19%, while product revenue rose 23% to $62.9 million. International sales and retail shipments associated with Amazon Prime Day supported product growth, while the company added 298 thousand paid accounts.
Subscriptions and services represented 60% of Q2 fiscal year 2026 revenue and generated an adjusted gross margin of 84.1%. In contrast, product margin was negative 11.6% after excluding the tariff refund because the company uses devices as a tool to acquire households. Annual recurring revenue reached $365 million, up 16%, and improvements in retention and average revenue per user increased account lifetime value to $967.
The company intends to launch Arlo Secure 7 in September 2026 and add a third subscription tier above the highest tier available at the time of the call. The announced features include an AI-powered assessment of the entire event and its threat level, with the aim of accelerating response and reducing false alarms. The release also includes improvements to continuous video recording and features requested by users, giving Arlo an opportunity to raise average revenue per user.
Arlo paid $15 million in cash to acquire Aloe Care, through which it entered the senior care and aging-in-place market, which management estimated at more than $30 billion. The technology began rolling out with Home Helpers for status monitoring, communication, and AI-powered check-ins. The company plans to test a direct-to-consumer channel, pricing, and additional channels during the second half of fiscal year 2026, with the results to be used in preparing the fiscal year 2027 plan.
The company expects revenue of between $140 million and $150 million and non-GAAP earnings of between $0.17 and $0.23 per diluted share in Q3 of fiscal year 2026. It raised its full fiscal year 2026 outlook to revenue of between $580 million and $600 million and earnings of between $0.90 and $1.00 per diluted share. Management is also targeting annual recurring revenue growth approaching 20% at year-end, supported by the launch of Arlo Secure 7 and improved conversions and renewals.
Adjusted product margin reached 1% in Q2 of fiscal year 2026 due to an $8 million tariff refund, but was negative 11.6% without it. Management expects product margin to return to negative levels during the second half because it is spending on promotions to increase device sales and acquire new households. Adjusted operating expenses also rose to $48.6 million and inventory to $48.4 million, so continued profitability expansion depends on converting those investments and sales into high-margin subscriptions.
