Arlo rides subscriptions to record quarter, pivots into elder care

Record quarter, bigger ambitions

Arlo Technologies delivered an exceptional Q2 2026, with total revenue reaching $156M (up 21% y/y), service revenue up 19% to $93M, and adjusted EBITDA up 70% to $31M. CEO Matt McRae opened the call: “Arlo delivered outstanding results in Q2 with service revenue, total revenue, gross profit and non-GAAP net income, all setting new records for the company.” — Matthew McRae, Chief Executive Officer · 2026-08-06 The quarter was boosted by an $8M tariff refund (worth ~$0.07 EPS), which CFO Kurt Binder noted on a pro forma basis still beat expectations: “including a favorable $0.07 impact due to tariff refunds... on a pro forma basis, assuming the exclusion of tariff refunds, our non-GAAP net income per diluted share would have been $0.21, ahead of both the midpoint of our guidance range and consensus EPS estimates.” — Kurt Binder, Chief Financial Officer · 2026-08-06

This momentum led management to raise full-year guidance: revenue to $580–600M and EPS to $0.90–1.00, a significant increase from prior expectations. The improvement is driven by a growing subscription engine — paid accounts reached 6.3M, up 23% y/y, with subscription revenue accounting for 60% of total revenue. The company's average revenue per user is rising, churn is down, and the lifetime value of a paid account has climbed to $967. The revenue trajectory shows strong acceleration, with total revenue more than doubling from 2021 lows.

Strategic pivot: elder care and small business

The most striking change on the call was the emphasis on the Aloe Care acquisition, which has now moved from "small bet" to explicit growth driver. McRae highlighted the first commercial deployment: “Home Helpers is a great example... They use the Aloe Care technology to monitor the health, but also communicate with the people in the field and be able to escalate and notify if there's something that needs to be corrected.” — Matthew McRae, Chief Executive Officer · 2026-08-06 He also revealed plans for market tests in both small business and the direct-to-consumer channel for Aloe Care, positioning the company to enter a $30B+ market for smart elder care that could grow tenfold over the next decade.

This pivot is a clear continuation of themes from prior calls. In May, McRae described the acquisition rationale: “It's really 2 layers... at the beginning, we talked about the size of the market... when we look at Aloe Care in particular, first, it's the team.” — Matthew McRae, CEO · 2026-05-08 The company is putting real weight behind this adjacency, planning to announce several more partner deployments over the next 6–9 months.

Partnerships and Secure 7

On the partnerships front, ADT's Blue offering has launched and is ramping, Comcast integration is on track (possibly moving earlier than expected), and Samsung's service remains imminent. McRae commented: “ADT has now launched... we expect them to kind of ramp through this year, especially in the back half... we're expecting some significant marketing spend and some visibility from ADT for that Blue offering.” — Matthew McRae, Chief Executive Officer · 2026-08-06 This builds on prior commentary where the company clearly laid out the path. In February, McRae outlined the Comcast opportunity: “Comcast, I can't say too much about... the scale of Comcast, how many Xfinity customers they have is really exciting for us.” — Matthew McRae, Chief Executive Officer (CEO) · 2026-02-27

The next major catalyst is Arlo Secure 7, launching at the end of Q3. McRae described the next level of AI: “we have been working on for more than a year now is actually going to that next level and actually assessing the entire event and what is the threat level... it provides numerous improvements to both user experience and the speed of emergency response.” — Matthew McRae, Chief Executive Officer · 2026-08-06 Secure 7 also introduces a new, higher-priced subscription tier — a lever to further expand ARPU and ARR, which is already growing at ~16% y/y. The company is targeting 20% service revenue growth for the year, and the guidance raise reflects confidence in that trajectory.

I have never been more excited about Arlo's potential and believe that the next 18 to 24 months will begin a new phase of success for the company.

Financial and valuation backdrop

Margins continue to expand: non-GAAP consolidated gross margin surpassed 50% (+480 bps y/y), and adjusted EBITDA margin hit 20%. The gross margin trajectory reflects the mix shift to high-margin subscription revenue. The balance sheet remains robust with $141M in cash. Cash deployment includes aggressive buybacks (~$20M in Q2 alone) and selective M&A.

The full-history price chart shows a -40.7% return since 2018, but the stock has been flat over the last 90 days (ret = -0.2%) with a modest drawdown from its 90-day peak (-17.8%). The market has yet to fully re-rate the company on its growing subscription base and new adjacency opportunities, but the strategic pivot combined with raising guidance suggests the story is gaining momentum.

Overall, this quarter marks a clear inflection: Arlo is no longer just a hardware/software security company — it is leveraging its platform to enter adjacent markets (care, small business) and is accelerating the transition to a pure-play subscription model. The tariff refund provided a tailwind, but the underlying operating performance is what warrants attention. As Secure 7 launches and Aloe Care scales, the next 12–24 months will test whether the company can deliver on its redefined vision. The Home Helpers deployment is the first concrete proof point of that expansion.