Arlo Technologies (NYSE: ARLO) grows Q1 revenue 26% and turns a profit
Filing Impact
Filing Sentiment
Form Type
10-Q
Arlo Technologies reported strong results for the quarter ended March 29, 2026, with revenue of $150.4 million, up 26.3% year over year, and net income of $14.9 million compared with a loss a year ago. Subscriptions and services revenue rose to $90.1 million, while product revenue reached $60.3 million, lifting total gross margin to 48.3%. The company ended the quarter with 13.1 million cumulative registered accounts, 6.0 million cumulative paid accounts, and annual recurring revenue of $356.9 million. Arlo closed the $48.9 million Canary asset acquisition and announced the Aloe Care Health deal for $15 million cash plus up to $25 million in earnout. It also sold a strategic investment for $18.9 million in cash and repurchased 0.6 million shares for $8.0 million, ending with $167.5 million in cash and short-term investments and an undrawn $45 million credit facility.
Positive
- None.
Negative
- None.
Insights
Arlo delivered profitable growth with expanding subscription scale and solid liquidity.
Arlo Technologies generated revenue of $150.4 million, up 26.3% year over year, and turned a prior-period loss into net income of $14.9 million. Subscriptions and services contributed $90.1 million, or nearly 60% of revenue, supporting a total gross margin of 48.3%.
High-margin recurring revenue is building, with cumulative paid accounts at 6.0 million and annual recurring revenue of $356.9 million, up 29.2%. Product gross margin remained negative but improved as warranty, inventory reserves and freight costs declined, while promotional pricing continued in retail channels.
Liquidity appears solid: cash and short-term investments totaled $167.5 million and the $45.0 million revolving credit facility was undrawn as of March 29 2026. The company also authorized a $50 million buyback, repurchasing $8.0 million of shares this quarter. Future filings may clarify how acquisitions and subscription growth affect margins and cash flow.
Two strategic deals and an investment sale reshape Arlo’s asset base.
Arlo closed the acquisition of Canary Connect, Inc., paying $36.0 million in cash plus $12.9 million of fixed deferred consideration, for total purchase consideration of $48.9 million. The allocation includes $19.5 million of intangible assets and $27.5 million of goodwill.
It also signed a Merger Agreement to acquire Aloe Care Health, Inc. for $15.0 million cash at closing plus up to $25.0 million in contingent earnout, payable in cash, stock, or a mix. Accounting for this deal is still preliminary, with fair values and goodwill to be detailed in a future quarterly report.
During the quarter, Arlo sold an equity investment related to a privately held company’s acquisition, receiving $18.9 million of cash and recognizing a realized gain of $6.4 million. These transactions, combined with an undrawn $45.0 million credit facility, give Arlo room to integrate acquisitions while maintaining financial flexibility.
Key Figures
Quarterly revenue: $150.4 million
Net income: $14.9 million
Subscriptions and services revenue: $90.1 million
+5 more
8 metrics
Quarterly revenue
$150.4 million
Three months ended March 29, 2026; up 26.3% year over year
Net income
$14.9 million
Three months ended March 29, 2026; vs. $0.8 million loss prior year
Subscriptions and services revenue
$90.1 million
Q1 2026; 59.9% of total revenue and up 30.9% year over year
Annual recurring revenue
$356.9 million
As of March 29, 2026; 29.2% growth year over year
Canary purchase consideration
$48.9 million
Business combination closed March 2026; cash plus fixed deferred consideration
Aloe Care cash consideration
$15.0 million
Cash paid at closing under Aloe Care Merger Agreement on April 16, 2026
Share repurchases
$8.0 million, 571,957 shares
Stock buybacks during quarter ended March 29, 2026 under $50M program
Cash, cash equivalents and short-term investments
$167.5 million
Balance as of March 29, 2026 on the condensed consolidated balance sheet
Key Terms
annual recurring revenue, business combination, deferred revenue, valuation allowance, +2 more
6 terms
annual recurring revenue financial
"annual recurring revenue (“ARR”) of $356.9 million."
Annual recurring revenue is the predictable amount of money a company expects to earn each year from ongoing customer subscriptions or contracts. It helps businesses understand how much steady income they can count on, much like a subscription service that charges customers every month or year. This figure is important because it shows the company's stability and growth potential.
business combination financial
"The transaction is accounted for as a business combination in accordance with ASC 805, Business Combinations."
A business combination happens when two or more companies join together to operate as one, like two friends merging their teams into a single group. This is important because it can change how companies grow, compete, and make money, often making them bigger and more powerful in the market.
deferred revenue financial
"Deferred revenue | 52,187 | 37,139"
Cash a company has already received for goods or services it has promised but not yet delivered; it's recorded as a liability because the company still owes that product, service, or future revenue recognition. For investors, deferred revenue signals upcoming work or deliveries that will convert into reported sales over time and affects short-term obligations, cash flow quality, and how quickly a firm can grow recognized revenue—think of it like prepaid subscriptions or gift cards a business must honor later.
valuation allowance financial
"we continue to maintain a full valuation allowance against our deferred tax assets at both federal and state levels."
A valuation allowance is a reserve set aside to reduce the value of certain assets on a company's financial records when there is uncertainty about whether they will generate the expected benefits. It acts like a caution sign, indicating that some assets might not be fully recoverable or worth their recorded amount. This matters to investors because it provides a more realistic picture of a company's financial health and potential risks.
Rule 10b5-1 trading arrangement regulatory
"intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act."
revolving credit facility financial
"a three-year revolving credit facility (the “Credit Facility”) of up to $45.0 million"
A revolving credit facility is a type of loan that a business can borrow from whenever it needs money, up to a set limit. It’s like having a credit card for companies—allowing them to borrow, pay back, and borrow again as needed, providing flexibility for managing cash flow or funding short-term expenses.
Earnings Snapshot
Revenue: $150.4 million
Q1 2026
Revenue
$150.4 million
+26.3% year over year
Net income
$14.9 million
from $(0.8) million loss year over year
Diluted EPS
$0.13
from $(0.01) year over year
Annual recurring revenue
$356.9 million
+29.2% year over year
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 29, 2026
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number: 001-38618
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(408 ) 890-3900
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | ||||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 108,609,817 as of May 1, 2026.
Table of Contents
Arlo Technologies, Inc.
Form 10-Q
For the Quarterly Period Ended March 29, 2026
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION | ||||||||
| Page | ||||||||
| Item 1. | Financial Statements | 3 | ||||||
Unaudited Condensed Consolidated Balance Sheets | 3 | |||||||
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) | 4 | |||||||
Unaudited Condensed Consolidated Statements of Stockholders’ Equity | 5 | |||||||
Unaudited Condensed Consolidated Statements of Cash Flows | 6 | |||||||
Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 35 | ||||||
| Item 4. | Controls and Procedures | 35 | ||||||
PART II: OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | 36 | ||||||
| Item 1A. | Risk Factors | 36 | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 36 | ||||||
| Item 5. | Other Information | 37 | ||||||
| Item 6. | Exhibits | 38 | ||||||
Signatures | 39 | |||||||
2
Table of Contents
PART I: FINANCIAL INFORMATION
Item 1.Financial Statements
ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | |||||||||||
| March 29, 2026 | December 31, 2025 | ||||||||||
(In thousands, except share and per share data) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Long-term investment | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Deferred revenue | |||||||||||
| Accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Non-current operating lease liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 8) | |||||||||||
| Stockholders’ Equity: | |||||||||||
Preferred stock: $ | |||||||||||
Common stock: $ | |||||||||||
| Additional paid-in capital | |||||||||||
Accumulated other comprehensive income (loss) | ( | ||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Table of Contents
ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscriptions and services | $ | $ | |||||||||||||||||||||
| Products | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscriptions and services | |||||||||||||||||||||||
| Products | |||||||||||||||||||||||
| Total cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Other operating expense | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income (loss) from operations | ( | ||||||||||||||||||||||
| Other income, net: | |||||||||||||||||||||||
| Gain on sale of long-term investment | |||||||||||||||||||||||
| Interest income, net | |||||||||||||||||||||||
| Other income (expense), net | ( | ||||||||||||||||||||||
| Total other income, net | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Earnings (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | ( | ||||||||||||||||||||
| Diluted | $ | $ | ( | ||||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ( | |||||||||||||||||||||
| Total comprehensive income (loss) | $ | $ | ( | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Table of Contents
ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Total stockholders’ equity, beginning balances | $ | $ | |||||||||||||||||||||
| Common stock and additional paid-in capital: | |||||||||||||||||||||||
| Beginning balances | $ | $ | |||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||
| Settlement of liability classified restricted stock units | |||||||||||||||||||||||
| Issuance of common stock under stock-based compensation plans | |||||||||||||||||||||||
Repurchases of common stock | ( | ( | |||||||||||||||||||||
| Ending balances | $ | $ | |||||||||||||||||||||
| Accumulated deficit: | |||||||||||||||||||||||
| Beginning balances | $ | ( | $ | ( | |||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Ending balances | $ | ( | $ | ( | |||||||||||||||||||
Accumulated other comprehensive income (loss): | |||||||||||||||||||||||
| Beginning balances | $ | $ | |||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ( | |||||||||||||||||||||
| Ending balances | $ | ( | $ | ||||||||||||||||||||
Total stockholders’ equity, ending balances | $ | $ | |||||||||||||||||||||
| Common stock shares: | |||||||||||||||||||||||
| Beginning balances | |||||||||||||||||||||||
| Issuance of common stock under stock-based compensation plans | |||||||||||||||||||||||
Repurchases of common stock | ( | ( | |||||||||||||||||||||
| Ending balances | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Table of Contents
ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | |||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Stock-based compensation expense, net of amounts capitalized | |||||||||||
| Depreciation and amortization | |||||||||||
| Gain on sale of long-term investment | ( | ||||||||||
| Allowance for credit losses and non-cash changes to reserves | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Discount accretion on investments and other | ( | ( | |||||||||
| Changes in assets and liabilities, net of assets acquired: | |||||||||||
| Accounts receivable, net | ( | ||||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other assets | |||||||||||
| Accounts payable | ( | ( | |||||||||
| Deferred revenue | |||||||||||
| Accrued and other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment, including capitalized software | ( | ( | |||||||||
| Purchases of short-term investments | ( | ( | |||||||||
| Purchase of long-term investment | ( | ||||||||||
Acquisition of business | ( | ||||||||||
| Proceeds from maturities of short-term investments | |||||||||||
| Proceeds from sale of long-term investment | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
Proceeds from employee stock plans | |||||||||||
Repurchases of common stock | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase in cash and cash equivalents | |||||||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | $ | $ | |||||||||
Non-cash investing and financing activities: | |||||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | $ | |||||||||
| Stock-based compensation expense capitalized for software development | $ | $ | |||||||||
Stock repurchases included in accounts payable | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business and Basis of Presentation
Description of business
Arlo Technologies, Inc. (“we,” “our,” “us,” or “Arlo”) is transforming the ways in which people can protect everything that matters to them with home, business, and personal security services that combine a globally scaled cloud platform, monitoring and analytics capabilities, and award-winning app-controlled devices to create a personalized security ecosystem. Arlo’s experience in cloud services, AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that can be setup by the customers and engaged with every day. Our cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection.
We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, strategic partners, security solution providers, and Arlo’s direct to consumer store.
Our corporate headquarters is located in Carlsbad, California, with other satellite offices across North America and various other global locations.
Basis of presentation
We prepare our unaudited condensed consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of Arlo and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on February 27, 2026. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods.
Fiscal periods
Our fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. We report the results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31.
Reclassification
Certain prior periods amounts have been reclassified to conform to the current period’s presentation. None of these reclassifications had a material impact to the unaudited condensed consolidated financial statements.
7
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Use of estimates
Note 2. Significant Accounting Policies and Recent Accounting Pronouncements
Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. During the three months ended March 29, 2026, there have been no significant changes to such policies except for the items below.
Business combinations
We account for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The purchase consideration for business combinations is measured at fair value as of the acquisition date and includes the fair value of assets transferred, liabilities incurred, and equity interests issued, as well as the fair value of any contingent consideration arrangements. Transaction costs associated with business combinations, such as legal, accounting, and advisory fees, are expensed as incurred and included in other operating expense on our unaudited condensed consolidated statements of operations and comprehensive income (loss). The results of operations of acquired businesses are included in our unaudited condensed consolidated financial statements from the respective acquisition dates.
Identifiable assets acquired and liabilities assumed are recognized at their acquisition‑date fair values. Any excess of the purchase consideration over the fair value of the identifiable net assets acquired is recorded as goodwill. Goodwill represents the future economic benefits arising from assets acquired that are not individually identifiable and separately recognized. Goodwill is not amortized but is subject to impairment testing at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired.
The determination of the acquisition‑date fair values of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, including assumptions related to forecasted cash flows, discount rates, expected useful lives of intangible assets, and the probability and timing of contingent payments. These estimates are based on information available as of the acquisition date and on assumptions management believes are reasonable; however, actual results may differ from those estimates.
8
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Acquired intangible assets
Accounting pronouncements recently adopted
During the three months ended March 29, 2026, we adopted Accounting Standards Update (“ASU”) No. 2023-06, Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting companies to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. This adoption did not have a material effect on our financial statements.
Accounting pronouncements not yet effective
Disclosure improvements. In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Among the various codification amendments, Topic 470 Debt is applicable to Arlo which requires the disclosure of amounts, terms and weighted-average interest rates of unused lines of credit. The effective date is either (i) the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or (ii) on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited. The adoption of this new standard will not have a material impact on our financial statements and related disclosures.
Expense disaggregation disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement: Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements. This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.
Software development costs accounting and disclosure. In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to “development stages”. It also clarifies the criteria for capitalization, which begins when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. This guidance is effective for annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.
9
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3. Revenue
Contract balances
The following table reflects the changes in contract balances for the three months ended March 29, 2026:
Contract Classification | Balance Sheet Classification | March 29, 2026 | December 31, 2025 | $ change | % change | |||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| Receivables | Accounts receivable, net | $ | $ | $ | % | |||||||||||||||||||||||||||
| Contract liabilities, current | Deferred revenue | $ | $ | $ | % | |||||||||||||||||||||||||||
| Contract liabilities, non-current | Other non-current liabilities | $ | $ | $ | ( | ( | % | |||||||||||||||||||||||||
Receivables increased primarily due to higher product and service sales. Contract liabilities increased primarily due to increases in subscriptions and services revenue as a result of changes in consumer subscription plans and a shift to additional annual prepaid subscriptions, as well as increases in cumulative paid accounts and rates of subscriptions. As of March 29, 2026, there were no contract assets.
For the three months ended March 29, 2026 and March 30, 2025, $21.4 million and $14.6 million, respectively, of the recognized revenue was included in deferred revenue at the beginning of the periods. There were no significant changes in estimates during the periods that would affect the contract balances.
Remaining performance obligations
The total estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied and remaining was $54.6 million as of March 29, 2026 and $40.6 million as of December 31, 2025, substantially related to performance obligations classified as less than one year
Under the Supply Agreement with Verisure Sàrl (“Verisure”), our largest customer, a performance obligation is not deemed to exist until we receive and accept Verisure’s purchase order. As of March 29, 2026, we had a backlog of $43.4 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months .
Variable consideration
Revenue from all sales is recognized at transaction price, the amount we expect to be entitled to in exchange for providing services or transferring goods. Transaction price is calculated as selling price net of variable consideration which includes estimates for sales incentives and sales returns related to current period products revenue. Sales incentives are determined based on a combination of the actual amounts committed and estimated future expenditure based upon historical customary business practice. Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for our products. Variable consideration estimates are based on predictive historical data or future commitments that we plan and control. However, we continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. The following tables provide activities related to sales incentives and sales returns that are recognized as contra-revenue.
10
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| Three Months Ended | |||||||||||||||||||||||
| Sales incentives | March 29, 2026 | March 30, 2025 | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Balance at the beginning of the period | $ | $ | |||||||||||||||||||||
Credits issued | ( | ( | |||||||||||||||||||||
Additions | |||||||||||||||||||||||
| Balance at the end of the period | $ | $ | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| Sales returns | March 29, 2026 | March 30, 2025 | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Balance at the beginning of the period | $ | $ | |||||||||||||||||||||
Credits issued | ( | ( | |||||||||||||||||||||
Additions | |||||||||||||||||||||||
| Balance at the end of the period | $ | $ | |||||||||||||||||||||
Disaggregation of revenue
We disaggregate our revenue into three geographic regions: the Americas, EMEA, and APAC, where we conduct our business. The following table presents revenue disaggregated by geographic region.
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Americas | $ | $ | |||||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| APAC | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
For the three months ended March 29, 2026 and March 30, 2025, one customer accounted for 40 % and 36 % of the total revenue, respectively. No other customer accounted for 10% or greater of the total revenue. As of March 29, 2026, one customer accounted for 60 %, and as of December 31, 2025, two customers accounted for 40 % and 17 % of the total accounts receivable, net. No other customers accounted for 10% or greater of the total accounts receivable, net.
11
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 4. Business Combinations
Canary Connect, Inc.
On March 11, 2026, we entered into, and simultaneously closed an Asset Purchase Agreement with Canary Connect, Inc. (“Canary”), a New York-based Internet of Things (“IoT”) company that designs and sells smart home security devices and SaaS solutions. The purpose of this transaction is to expand our presence in the AI-driven smart home security market. The transaction is accounted for as a business combination in accordance with ASC 805, Business Combinations. As a result of the transaction, we obtained control of Canary by obtaining the ability to direct its ongoing operations and to receive substantially all of the economic benefits associated.
As part of this transaction, we also entered into a Transitional Service Agreement with Canary and a Platform Transformation Agreement with Smartfrog & Canary Holdings, Inc. (“Smartfrog Group”) in order to continue servicing Canary’s existing customers and subscribers.
We allocate the purchase consideration to the identifiable assets acquired and liabilities assumed in this business combination based on their acquisition-date fair values, which is determined using income and market-based valuation techniques that require significant judgments and assumptions, including projected revenue, profitability and cash flows. Goodwill recognized through our business combinations represents the excess of the purchase price over the fair value of identifiable net assets and is primarily attributable to expected synergies and operational efficiencies and anticipated future economic benefits. The resulting goodwill from the Canary acquisition is deductible for income tax purposes.
The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period, which is up to one year from the acquisition date. The acquired intangible assets will be amortized over their estimated useful lives.
The acquisition date fair value of the consideration transferred consisted of the following (in thousands):
| Cash paid at close | $ | ||||
Fixed deferred acquisition consideration | |||||
| Total purchase consideration | $ | ||||
The purchase price allocation are as follows (in thousands):
| Assets acquired: | |||||
| Inventory | $ | ||||
| Intangible assets | |||||
| Goodwill | |||||
| Total assets acquired | $ | ||||
| Liabilities assumed: | |||||
| Total liabilities assumed | $ | ||||
| Fair value of assets acquired and liabilities assumed, net | $ | ||||
During the three months ended March 29, 2026, we recorded $0.5 million acquisition-related costs, which are expensed when incurred and included in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).
12
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the three months ended March 29, 2026, Canary’s results of operations are not material and are included within our unaudited condensed consolidated financial statements from an effective date of March 1, 2026. The effect of this business combination was not material to our financial results. Therefore, the actual and pro-forma results of operations subsequent to the acquisition date to March 29, 2026 have not been presented.
Aloe Care Health, Inc.
On April 16, 2026, we entered into, and simultaneously closed a Merger Agreement with Aloe Care Health, Inc. (“Aloe Care”), a privately held company that provides an AI-powered medical alert and fall prevention platform for patients and their caregivers. The transaction is intended to accelerate the expansion of our AI-powered services for aging-in-place care in collaboration with health providers, patients and their families. Under the Merger Agreement, we acquired 100 % of the outstanding equity interests of Aloe Care in exchange for (i) $15.0 million of cash consideration paid at closing; and (ii) contingent earnout of up to $25.0 million, payable, at our option, in cash, shares of our common stock, or a combination of cash and shares, subject to the terms of the Merger Agreement. The transaction will be accounted for as a business combination in accordance with ASC 805, Business Combinations. As a result of the transaction, we obtained control of Aloe Care by obtaining the ability to direct its ongoing operations and to receive substantially all of the economic benefits associated with Aloe Care.
During the three months ended March 29, 2026, we recorded $0.8 million acquisition-related costs, which are expensed when incurred and included in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).
The initial accounting for this business combination is incomplete at the date of this filing as a result of limited time between the acquisition date and the filing date. Accordingly, certain disclosures required under ASC 805, Business Combinations, including the preliminary fair values of assets acquired and liabilities assumed, pre-acquisition contingencies and any residual goodwill have not been provided. We are in the process of gathering the necessary information to complete the accounting for the transaction. Such information will be included in our Quarterly Report on Form 10-Q for the quarter ending on June 28, 2026.
13
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5. Balance Sheet Components
Short-term investments
| As of March 29, 2026 | As of December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Property and equipment, net
| As of | |||||||||||
| March 29, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Machinery and equipment | $ | $ | |||||||||
Capitalized software development costs | |||||||||||
| Software and license | |||||||||||
| Computer equipment | |||||||||||
Leasehold improvements | |||||||||||
| Furniture and fixtures | |||||||||||
| Total property and equipment, gross | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense pertaining to property and equipment are as follows:
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Depreciation: | |||||||||||||||||||||||
| Operating expenses | $ | $ | |||||||||||||||||||||
| Amortization: | |||||||||||||||||||||||
| Subscriptions and services cost | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Total depreciation and amortization | $ | $ | |||||||||||||||||||||
Goodwill
We have determined that no event occurred or circumstances changed during the three months ended March 29, 2026 that would more likely than not reduce the fair value of goodwill below the carrying amount. There was no accumulated goodwill impairment recognized as of March 29, 2026.
14
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible assets, net
Intangible assets acquired through business combination as of March 29, 2026 were as follows:
| Gross carrying amount | Weighted-average remaining useful lives | |||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Customer relationship | $ | |||||||||||||||||||||||||
Proprietary technologies | ||||||||||||||||||||||||||
Trade names | ||||||||||||||||||||||||||
| Total intangible assets | $ | |||||||||||||||||||||||||
Amortization of intangible assets resulting from business combination for the month of March 2026 since the acquisition date was de-minimis. There were no intangible assets impairment recognized as of March 29, 2026. The expected future amortization expense for intangible assets as of March 29, 2026 was as follows (in thousands):
| 2026 (Remaining nine months) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total | $ | ||||
Accrued liabilities
| As of | |||||||||||
| March 29, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
Sales incentives and marketing expenditures | $ | $ | |||||||||
Sales returns | |||||||||||
Employee compensation | |||||||||||
| Cloud and other costs | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
15
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 6. Fair Value Measurements
The following table summarizes assets measured at fair value on a recurring basis:
| As of | |||||||||||
| March 29, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
Cash equivalents: money-market funds (<90 days) | $ | $ | |||||||||
Cash equivalents: U.S. Treasuries (<90 days) | |||||||||||
Available-for-sale securities: U.S. Treasuries (1) | |||||||||||
| Total | $ | $ | |||||||||
_________________________
(1)Included in short-term investments on our unaudited condensed consolidated balance sheets.
Sale of long-term investment
During the three months ended March 29, 2026, we sold our investment in connection with a privately held company’s acquisition by a public company. This investment was accounted for as an equity security without a readily determinable fair value and was measured at cost, less impairment, adjusted for observable price changes in orderly transactions for the identical or similar investment in the same issuer in accordance with ASC 321, Investments-Equity Securities. Upon completion of the sale, we received total cash proceeds of $18.9 million and recognized a realized gain of $6.4 million, representing the excess of proceeds received over the carrying value of the investment. The gain from the sale of the investment is included in other income (expense), net on the unaudited condensed consolidated statements of operations and comprehensive income (loss).
Our Chief Executive Officer served on the board of directors of the privately held company and, as a result, the investee is considered a related party and the sale of our investment is a related party transaction.
As of March 29, 2026, there were no financial assets measured at fair value on a recurring basis within Level 3 fair value measurements. Our non-financial assets, such as property and equipment, goodwill, and intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.
16
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 7. Revolving Credit Facility
On November 14, 2024, we entered into a credit agreement (the “Credit Agreement”) with HSBC Bank USA, National Association, as administrative agent, issuing bank, and lender. The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) of up to $45.0 million that matures on November 14, 2027, which also includes a $10.0 million sublimit for the issuance thereunder of letters of credit. As of March 29, 2026, we had unused borrowing capacity of $45.0 million based on the terms and conditions of the Credit Agreement. In addition, the Credit Agreement includes an uncommitted accordion feature that allows us to, from time to time, request an increase to the aggregate revolving loan commitments by up to an additional $30.0 million in the aggregate, subject to the satisfaction of certain conditions. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes.
The obligations under the Credit Agreement are secured by substantially all of our assets, including substantially all of the assets of a material subsidiary, Arlo Technologies International Limited, a limited corporation organized under the laws of Ireland. Borrowings under the Credit Agreement will bear interest at a floating rate equal to: (i) the term secured overnight financing rate plus the applicable rate of 2.25 % to 2.75 %, or (ii) the base rate plus the applicable rate of 1.25 % to 1.75 % both determined based on a total net leverage ratio. Among other fees, we are required to pay a quarterly unused fee of 0.20 % per annum on the amount by which the lenders’ aggregate commitment under the Credit Facility exceeds the daily revolver usage during such quarter. The Credit Agreement contains events of default, representations and warranties, and affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains financial covenants that require us to (i) maintain a fixed charge coverage ratio of at least 1.50 to 1.00 and (ii) maintain a total net leverage ratio, not to exceed 3.00 to 1.00; both covenants being tested quarterly on a trailing four consecutive fiscal quarter basis.
Note 8. Commitments and Contingencies
Operating leases
Our operating lease obligations mostly include offices, equipment, and distribution centers, with various expiration dates through June 2033. Certain lease agreements include options to renew or terminate the lease, which are generally not reasonably certain to be exercised and therefore are not factored into our determination of lease payments. The terms of certain leases provide for rental payments on a graduated scale. Gross lease expense was $0.8 million and $1.4 million for the three months ended March 29, 2026 and March 30, 2025, respectively.
Supplemental cash flow information related to operating leases is as follows:
| Three Months Ended | |||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for lease liabilities | |||||||||||
| Operating leases | $ | $ | |||||||||
17
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Weighted average remaining lease term and weighted average discount rate related to operating leases are as follows:
| As of | |||||||||||
| March 29, 2026 | December 31, 2025 | ||||||||||
| Weighted average remaining lease term | |||||||||||
| Weighted average discount rate | % | % | |||||||||
The future minimum undiscounted lease payments under operating leases for each of the next five years and thereafter as of March 29, 2026 were as follows:
| 2026 (Remaining nine months) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total future lease payments | $ | ||||
| Less: imputed interest | ( | ||||
| Present value of future minimum lease payments | $ | ||||
| Accrued liabilities | $ | ||||
| Non-current operating lease liabilities | |||||
| Total lease liabilities | $ | ||||
Purchase obligations
We have entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50 % of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25 % of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. As of March 29, 2026, we had $35.6 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months .
As of March 29, 2026, an additional $29.9 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements. Consequently, we may incur expenses for the materials and components, such as chipsets already purchased by the supplier to fulfill our orders if the purchase order is cancelled. Expenses incurred have historically not been material relative to the original order value.
Tariff matters
The U.S. government has implemented tariff measures affecting a broad range of imported materials, and these measures have been subject to change. We are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment. Given the uncertainty surrounding global markets as a result of the fluid U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations. As of March 29, 2026, we have not recorded any receivables for potential tariff refunds or derecognition of tariff liabilities.
18
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Litigation and other legal matters
We are, and from time to time, we may become involved in disputes, litigation, and other legal actions in the ordinary course of business. At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Significant judgment is required to determine both the probability and the estimated amount of loss. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as litigation reserves in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss). We monitor developments in these legal matters that could affect the estimate we had previously accrued. We currently believe that there are no existing claims or proceedings that are likely to have a material adverse effect on our financial position within the next 12 months. There are many uncertainties associated with any litigation, and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require us to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from our estimates, which could result in the need to adjust the liability and record additional expenses.
Indemnifications
In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, distributors, resellers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising from breach of such agreements or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with members of our Board of Directors and certain of our executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited. As of March 29, 2026 and December 31, 2025, we have not incurred any material costs as a result of such indemnification obligations and we are not currently aware of any indemnification claims.
Note 9. Employee Benefit Plans
We grant options and restricted stock units (“RSUs”) under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees. We also grant performance-based and market-based restricted stock units (“PSUs”) to our executive officers and other senior employees periodically. Award vesting periods for the 2018 Plan are generally three to five years . As of March 29, 2026, 3.3 million shares were available for future grants. Options may be granted for periods of up to 10 years or such shorter term as may be provided in the agreement and at prices no less than 100 % of the fair market value of Arlo’s common stock on the date of grant. Options granted under the 2018 Plan generally vest over three to four years , the first tranche at the end of 12 months and the remaining shares underlying the option vesting monthly over the remaining years.
On January 23, 2026, we registered an aggregate of up to 4,200,189 shares of common stock under the 2018 Plan on a Registration Statement on Form S-8 pursuant to an “evergreen” provision contained in the 2018 Plan.
19
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the available shares for grants as of March 29, 2026:
| Number of Shares | |||||
| (In thousands) | |||||
Shares available for grants as of December 31, 2025 | |||||
| Additional authorized shares | |||||
| Granted | ( | ||||
| Forfeited / expired / cancelled | |||||
Shares available for grants as of March 29, 2026 | |||||
Employee stock purchase plan
We sponsor the ESPP for eligible employees. There were no ESPP purchases during either the three months ended March 29, 2026 or March 30, 2025. As of March 29, 2026, 3.1 million shares were available for issuance under the ESPP.
Option activity
We did not grant options during the three months ended March 29, 2026. Stock option activity during the three months ended March 29, 2026 was as follows:
| Number of Shares | Weighted Average Exercise Price Per Share | ||||||||||
| (In thousands) | (In dollars) | ||||||||||
Outstanding as of December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Exercised | $ | ||||||||||
| Expired / cancelled | $ | ||||||||||
Outstanding as of March 29, 2026 | $ | ||||||||||
Vested and exercisable as of March 29, 2026 | $ | ||||||||||
RSU activity
RSU activity, exclusive of PSU activity, during the three months ended March 29, 2026 was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| (In thousands) | (In dollars) | ||||||||||
Outstanding as of December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited / cancelled | ( | $ | |||||||||
Outstanding as of March 29, 2026 | $ | ||||||||||
20
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PSU activity
Our executive officers and other senior employees have been granted PSUs with some vesting occurring when performance conditions are met. The number of units earned and eligible to vest are determined based on the achievement of various performance conditions, including annual recurring revenue, cumulative paid accounts, subscriptions and services gross profit and gross margin, and the recipients’ continued services. At the end of each reporting period, we evaluate the probability of achieving the performance conditions and record the related stock-based compensation expense based on the estimated achievement over the service period.
PSU activity during the three months ended March 29, 2026 was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| (In thousands) | (In dollars) | ||||||||||
Outstanding as of December 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited / cancelled | ( | $ | |||||||||
Outstanding as of March 29, 2026 | $ | ||||||||||
Stock-based compensation expense
The following table sets forth the stock-based compensation expense by line item on the unaudited condensed consolidated statements of operations and comprehensive income (loss):
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | $ | |||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Stock-based compensation, net of amounts capitalized | $ | $ | |||||||||||||||||||||
| Capitalized stock-based compensation | |||||||||||||||||||||||
| Total stock-based compensation | $ | $ | |||||||||||||||||||||
21
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 10. Income Taxes
The provision for income taxes for the three months ended March 29, 2026 was $0.4 million or an effective tax rate of 2.7 % . The provision for income taxes for the three months ended March 30, 2025 was $0.5 million or an effective tax rate of (150.8 )%. Provision for income taxes decreased for the three months ended March 29, 2026, compared to the prior year period, primarily due to the elimination of the mandatory capitalization of research and development expenses, resulting in higher current deductions, lower taxable income and a reduced income tax provision. The lower effective tax rate for the three months ended March 29, 2026, compared to the U.S. federal statutory rate, is primarily driven by lower tax rate on foreign earnings and valuation allowance on our net U.S. deferred tax assets and certain foreign tax attributes.
We evaluated the realizability of deferred tax assets on a jurisdictional basis in accordance with ASC 740 Income taxes. A valuation allowance is maintained when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of March 29, 2026, we continue to maintain a full valuation allowance against our deferred tax assets at both federal and state levels. In making this determination, we considered all available positive and negative evidence, with greater weight given to objectively verifiable evidence.
Although we have recently generated cumulative pre-tax income, we determined that we have not yet demonstrated a sustained level of profitability sufficient to support realization of the deferred tax assets. We also considered forecasted future taxable income; however, such projections are inherently uncertain and do not outweigh the available negative evidence. Based on the totality of evidence, we concluded that it is not more-likely-than-not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been maintained as of March 29, 2026. There is a reasonable possibility that within the next few quarters, sufficient positive evidence will become available to reach a conclusion that all or a significant portion of the valuation allowance against our U.S. net deferred tax assets would no longer be required.
Note 11. Earnings (Loss) Per Share
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding - basic | |||||||||||||||||||||||
| Effect of dilutive stock-based awards | |||||||||||||||||||||||
| Weighted-average common shares outstanding - diluted | |||||||||||||||||||||||
| Earnings (loss) per share - basic | $ | $ | ( | ||||||||||||||||||||
| Earnings (loss) per share - diluted | $ | $ | ( | ||||||||||||||||||||
| Anti-dilutive employee stock-based awards, excluded | |||||||||||||||||||||||
22
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 12. Segment and Geographic Information
Segment information
We operate as one
The CODM is regularly provided with not only the consolidated expenses on our unaudited condensed consolidated statements of operations and comprehensive income (loss), but also the significant segment expenses and other segment items as below:
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Revenue | $ | $ | |||||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Personnel-related expense | |||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||
| Outside professional services | |||||||||||||||||||||||
| Marketing expenditure | |||||||||||||||||||||||
| Credit card and in-app processing fee | |||||||||||||||||||||||
Other segment items (1) | ( | ||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
Gain on sale of long-term investment | ( | ||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Segment net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Reconciliation of profit or loss: | |||||||||||||||||||||||
| Adjustments and reconciling items | |||||||||||||||||||||||
| Consolidated net income (loss) | $ | $ | ( | ||||||||||||||||||||
(1)Other segment items include acquisition-related expense, corporate IT and facility overhead, freight out expense, workforce reduction costs, interest income, foreign currency exchange gain (loss), net and others.
23
Table of Contents
ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Geographic information for revenue
Revenue consists of subscriptions and services revenue and product sales, less allowances for estimated sales returns, price protection, end-user customer rebates, net changes in deferred revenue, and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance. Sales and usage-based taxes are excluded from revenue. For reporting purposes, revenue by geographic area is generally based upon the bill-to location of the customer. The following table presents revenue by geographic area.
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| United States | $ | $ | |||||||||||||||||||||
| Spain | |||||||||||||||||||||||
| Sweden | |||||||||||||||||||||||
| Other countries | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
Geographic information for long-lived assets
Long-lived assets include property and equipment, net and operating lease right-of-use assets, net. Our long-lived assets are based on the physical location of the assets. The following table presents long-lived assets by geographic area.
| As of | |||||||||||
| March 29, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| United States | $ | $ | |||||||||
| Other countries | |||||||||||
| Total | $ | $ | |||||||||
Note 13. Stock Repurchase Program
On February 3, 2026, our Board of Directors approved a stock repurchase program for up to an aggregate of $50.0 million of shares of Arlo’s common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of Arlo’s common stock. The stock repurchase program is expected to continue through December 31, 2027, unless extended or shortened by the Board of Directors.
The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the three months ended March 29, 2026, we repurchased and subsequently retired 0.6 million shares of Arlo common stock for an aggregate repurchase amount of $8.0 million. As of March 29, 2026, $42.0 million remained available and authorized for future repurchases.
24
Table of Contents
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Statements
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “could,” “may,” “will,” and similar expressions are intended to identify forward-looking statements, including statements concerning our business and the expected performance characteristics, specifications, reliability, market acceptance, market growth, specific uses, user feedback, and market position of our products and technology. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in “Part II—Item 1A—Risk Factors” and “Liquidity and Capital Resources” below.
All forward-looking statements in this document are based on information available to us as of the date hereof, such information may be limited or incomplete, and we assume no obligation to update any such forward-looking statements. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report. Unless expressly stated or the context otherwise requires, the terms “we,” “our,” “us,” the “Company,” and “Arlo” refer to Arlo Technologies, Inc. and our subsidiaries.
Business and Executive Overview
Arlo is transforming the ways in which people can protect everything that matters to them with advanced home, business, and personal security services that combine a globally scaled cloud platform, advanced monitoring and analytics capabilities, and award-winning app-controlled devices to create a personalized security ecosystem. Arlo’s deep expertise in cloud services, cutting-edge AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that is easy to setup and engage with every day. Our highly secure, cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection – all rooted in a commitment to safeguard privacy for our users and their personal data.
Since the launch of our first product in December 2014, we have shipped over 44.1 million smart security devices. As of March 29, 2026, the Arlo platform had approximately 13.1 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 6.0 million cumulative paid accounts and annual recurring revenue (“ARR”) of $356.9 million.
We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and we primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, strategic partners, security solution providers, and Arlo’s direct to consumer store. For the three months ended March 29, 2026 and March 30, 2025, we generated total revenue of $150.4 million and $119.1 million, respectively, and income (loss) from operations was $7.6 million and $(1.5) million, respectively.
Our goal is to continue to develop innovative, world-class smart security solutions to expand and further monetize our current and future user and paid account bases. We believe that the growth of our business is dependent on many factors, including our ability to innovate and launch successful new products on a timely basis and grow our installed base, to increase subscription-based recurring revenue, to invest in channel and other strategic partnerships and to continue our global expansion. We expect to increase our investment in research and development going forward as we continue to introduce new and innovative products and services to enhance the Arlo platform and compete for engineering talent. We
25
Table of Contents
also expect our sales and marketing expenses to increase in the future as we invest in marketing to drive demand for our products and services.
Key Business Metrics
In addition to the measures presented in our consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. We believe these key business metrics provide useful information by offering the ability to make more meaningful period-to-period comparisons of our on-going operating results and a better understanding of how management plans and measures our underlying business. Our key business metrics may be calculated in a manner different from the same key business metrics used by other companies. We regularly review our processes for calculating these metrics, and from time to time we may discover a need to make adjustments to better reflect our business. We believe that any such adjustments are immaterial unless otherwise stated.
| As of | |||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||
| Cumulative registered accounts | 13,052 | 19.4 | % | 10,930 | |||||||||||||
| Cumulative paid accounts | 6,005 | 22.6 | % | 4,897 | |||||||||||||
Annual recurring revenue (“ARR”) | $ | 356,921 | 29.2 | % | $ | 276,357 | |||||||||||
Cumulative Registered Accounts. Registered accounts at the end of a particular period are defined as the number of unique registered accounts on our platforms. The number of registered accounts does not directly correspond to the number of users. A single account may be shared by multiple users (which we consider as one account) and a single user may have multiple accounts (which we consider as multiple accounts).
Cumulative Paid Accounts. Paid accounts at the end of a particular period are defined as any account worldwide where a subscription-based or otherwise recurring service fee was collected by Arlo (either directly from a user or from a partner).
Annual Recurring Revenue. We believe ARR enables measurement of our business initiatives and serves as an indicator of our future growth. ARR represents and is defined as the annualized paid subscriptions and services revenue we expect to recognize from subscription contracts, as calculated by taking the average paid subscriptions and services revenue per paid account of the reporting period multiplied by the number of paid accounts at the end of the reporting period. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.
Impact of Global Geopolitical, Economic and Business Conditions
The U.S. government has implemented tariff measures affecting a broad range of imported materials, and these measures have been subject to change. While we are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment, we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets as a result of the fluid U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our suppliers ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.
26
Table of Contents
Results of Operations
We operate as one operating and reportable segment. The following table sets forth, for the periods presented, the unaudited condensed consolidated statements of operations and comprehensive income (loss) data, which we derived from the accompanying unaudited condensed consolidated financial statements:
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions and services | $ | 90,099 | 59.9 | % | $ | 68,849 | 57.8 | % | |||||||||||||||||||||||||||||||||||||||
| Products | 60,283 | 40.1 | % | 50,217 | 42.2 | % | |||||||||||||||||||||||||||||||||||||||||
| Total revenue | 150,382 | 100.0 | % | 119,066 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Subscriptions and services | 14,682 | 9.8 | % | 12,265 | 10.3 | % | |||||||||||||||||||||||||||||||||||||||||
| Products | 63,032 | 41.9 | % | 54,074 | 45.4 | % | |||||||||||||||||||||||||||||||||||||||||
| Total cost of revenue | 77,714 | 51.7 | % | 66,339 | 55.7 | % | |||||||||||||||||||||||||||||||||||||||||
| Gross profit | 72,668 | 48.3 | % | 52,727 | 44.3 | % | |||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | 22,814 | 15.2 | % | 16,165 | 13.6 | % | |||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 22,654 | 15.1 | % | 20,203 | 17.0 | % | |||||||||||||||||||||||||||||||||||||||||
| General and administrative | 18,207 | 12.0 | % | 17,785 | 14.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Other operating expense | 1,435 | 1.0 | % | 25 | — | % | |||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 65,110 | 43.3 | % | 54,178 | 45.5 | % | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | 7,558 | 5.0 | % | (1,451) | (1.2) | % | |||||||||||||||||||||||||||||||||||||||||
| Other income, net: | |||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of long-term investment | 6,423 | 4.4 | % | — | — | % | |||||||||||||||||||||||||||||||||||||||||
| Interest income, net | 1,241 | 0.8 | % | 1,316 | 1.1 | % | |||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | 70 | — | % | (198) | (0.2) | % | |||||||||||||||||||||||||||||||||||||||||
| Total other income, net | 7,734 | 5.2 | % | 1,118 | 0.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 15,292 | 10.2 | % | (333) | (0.3) | % | |||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 415 | 0.3 | % | 502 | 0.4 | % | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 14,877 | 9.9 | % | $ | (835) | (0.7) | % | |||||||||||||||||||||||||||||||||||||||
Revenue
Our gross revenue consists primarily of paid subscriptions and services revenue and sales of devices. Our paid subscription services are billed in advance of the start of the annual or monthly subscription and revenue is recognized ratably over the subscription period. We generally recognize revenue from product sales at the time the product is shipped and transfer of control from us to the customer occurs.
Our revenue consists of gross revenue, less customer rebates and other channel sales incentives, allowances for estimated sales returns, price protection, and net changes in deferred revenue. A significant portion of our marketing expenditure is with customers and is deemed to be a reduction of revenue under authoritative guidance for revenue recognition.
27
Table of Contents
We conduct business across three geographic regions—(i) the Americas; (ii) EMEA; and (iii) APAC—and generally base revenue by geographic region on the bill-to location of the customer for device location for subscriptions and services sales and device sales.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Americas | $ | 83,986 | 19.8 | % | $ | 70,097 | |||||||||||||||||||||||||||||
| Percentage of revenue | 55.9 | % | 58.9 | % | |||||||||||||||||||||||||||||||
| EMEA | 60,665 | 41.4 | % | 42,895 | |||||||||||||||||||||||||||||||
| Percentage of revenue | 40.3 | % | 36.0 | % | |||||||||||||||||||||||||||||||
| APAC | 5,731 | (5.6) | % | 6,074 | |||||||||||||||||||||||||||||||
| Percentage of revenue | 3.8 | % | 5.1 | % | |||||||||||||||||||||||||||||||
| Total revenue | $ | 150,382 | 26.3 | % | $ | 119,066 | |||||||||||||||||||||||||||||
Revenue by classification is as follows:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Subscriptions and services | $ | 90,099 | 30.9 | % | $ | 68,849 | |||||||||||||||||||||||||||||
| Products | 60,283 | 20.0 | % | 50,217 | |||||||||||||||||||||||||||||||
| Total revenue | $ | 150,382 | 26.3 | % | $ | 119,066 | |||||||||||||||||||||||||||||
Subscriptions and services revenue increased by $21.3 million or 30.9%, for the three months ended March 29, 2026 compared to the prior year period, primarily due to a 22.6% increase in cumulative paid accounts and continued increase in average revenue per user (“ARPU”) on retail and direct paid subscription services driven by higher volume of annual plan renewals.
Products revenue increased by $10.1 million or 20.0%, for the three months ended March 29, 2026 compared to the prior year period, primarily due to the increase in product shipments to our largest customer in EMEA due to stronger customer demand coupled with lower sales incentives and sales returns on retail that are both deemed to be reductions of revenue. The increase was partially offset by a reduction in average selling prices (“ASPs”) of our products in retail channels as we continue promotional activities to stimulate household acquisition and subscriber growth.
Cost of Revenue
Cost of revenue consists of both subscriptions and services cost as well as products cost. Subscriptions and services cost consists of costs attributable to the provision and maintenance of our cloud-based platform, including personnel expense, data storage, security and computing, IT and facilities overhead, and amortization of software development. Products cost primarily consists of the cost of finished products from our third-party manufacturers and overhead costs, including personnel expense for operations staff, purchasing, product planning, inventory control, warehousing and distribution logistics, third-party software licensing fees, inbound freight, duty and tariff costs, IT and facilities overhead, warranty costs associated with returned goods, write-downs for excess and obsolete inventory and excess components, and royalties to third parties.
Our cost of revenue as a percentage of revenue can vary based upon a number of factors, including those that may affect our revenue set forth above and factors that may affect our cost of revenue, including, without limitation, product
28
Table of Contents
mix, sales channel mix, registered accounts’ acceptance of paid subscription service offerings, and changes in our cost of goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freight, duty and tariff costs, and charges for excess or obsolete inventory. We outsource our manufacturing, warehousing, and distribution logistics. We also outsource certain components of the required infrastructure to support our cloud-based back-end IT infrastructure. We believe this outsourcing strategy generally allows us to better manage our products cost and subscriptions and services cost and gross margin and allows us to adapt to changing market dynamics and supply chain constraints. However, with respect to manufacturing that we have outsourced to ex-U.S. manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||||||||
| Subscriptions and services | $ | 14,682 | 19.7 | % | $ | 12,265 | |||||||||||||||||||||||||||||
| Products | 63,032 | 16.6 | % | 54,074 | |||||||||||||||||||||||||||||||
| Total cost of revenue | $ | 77,714 | 17.1 | % | $ | 66,339 | |||||||||||||||||||||||||||||
Subscriptions and services cost of revenue increased by 19.7% for the three months ended March 29, 2026, compared to the prior year period, primarily due to subscriptions and services revenue growth, partially offset by cost savings as we optimize our cloud platform to improve customer experience which assists in reduced data storage and cloud compute costs.
Products cost of revenue increased by 16.6% for the three months ended March 29, 2026, compared to the prior year period, primarily due to the increase in product shipments, partially offset by decreases in product warranty and inventory reserves, as well as the decrease in freight-in costs as a result of the utilization of ocean freight.
Gross Profit
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||||||
| Subscriptions and services | $ | 75,417 | 33.3 | % | $ | 56,584 | |||||||||||||||||||||||||||||
| Products | (2,749) | ** | (3,857) | ||||||||||||||||||||||||||||||||
| Total gross profit | $ | 72,668 | 37.8 | % | $ | 52,727 | |||||||||||||||||||||||||||||
| Gross margin percentage: | |||||||||||||||||||||||||||||||||||
| Subscriptions and services | 83.7 | % | 82.2 | % | |||||||||||||||||||||||||||||||
| Products | (4.6) | % | (7.7) | % | |||||||||||||||||||||||||||||||
| Total gross margin | 48.3 | % | 44.3 | % | |||||||||||||||||||||||||||||||
**Percentage change not meaningful.
Subscriptions and services gross profit increased by $18.8 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to subscriptions and services revenue growth as a result of increases in cumulative paid accounts, continued increase in ARPU on retail subscriptions, and cost optimizations.
Products gross profit improved by $1.1 million for the three months ended March 29, 2026, compared to the prior year period, primarily driven by lower product warranty and inventory reserves, as well as the decrease in freight-in costs due to the utilization of ocean freight. The improvement was partially offset by a reduction in the ASPs of our products in retail channel as we continue promotional activities to stimulate household acquisition and subscriber growth.
29
Table of Contents
Operating Expenses
Research and Development
Research and development expense consists primarily of personnel-related expense, safety, security, regulatory services and testing, other research and development consulting fees, and allocated IT and facilities overhead. Generally, we recognize research and development expenses as they are incurred, exclusive of capitalized software development costs. We have invested in and expanded our research and development organization to enhance our ability to introduce innovative products and services. We expect research and development expense to increase in absolute dollars as we develop new product and service offerings and compete for engineering talent. We believe that innovation and technological leadership are critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services, including our hardware devices, cloud-based software, AI-based algorithms, and machine learning capabilities.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Research and development expense | $ | 22,814 | 41.1 | % | $ | 16,165 | |||||||||||||||||||||||||||||
Research and development expense increased by $6.6 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to increases of $3.3 million in stock-based compensation as a result of the increase in our stock price; $2.5 million in payroll-related compensation as a result of headcount increases; and $0.5 million in outside professional services as we continued our investment in platform services.
Sales and Marketing
Sales and marketing expense consists primarily of personnel expense for sales and marketing staff, technical support expense, advertising, trade shows, media and placement, corporate communications and other marketing expense, product marketing expense, allocated IT and facilities overhead, outbound freight costs, and credit card processing fees. We expect our sales and marketing expense to increase in the future as we invest in marketing to drive demand for our subscriptions and services and devices.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Sales and marketing expense | $ | 22,654 | 12.1 | % | $ | 20,203 | |||||||||||||||||||||||||||||
Sales and marketing expense increased by $2.5 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to increases of $1.2 million in credit card and in-app processing fees as a result of the increase in paid accounts and focused efforts to improve our customer’s app experience; $0.9 million in marketing expenditures; and $0.2 million in professional services as we continued our investment in our customer experience improvement.
30
Table of Contents
General and Administrative
General and administrative expense consists primarily of personnel-related expense for certain executives, finance and accounting, investor relations, human resources, legal, information technology, professional fees, allocated IT and facilities overhead, strategic initiatives expense, and other general corporate expense. We expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| General and administrative expense | $ | 18,207 | 2.4 | % | $ | 17,785 | |||||||||||||||||||||||||||||
General and administrative expense increased by $0.4 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to an increase of $2.0 million in legal professional services. The increase was partially offset by decreases of $0.8 million in payroll-related compensation as a result of headcount decreases and $0.6 million in IT and facilities overhead related to allocation associated with corporate infrastructure.
Other operating expenses
Other operating expenses primarily include acquisition-related expense and workforce reduction costs.
Other Income, Net
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Gain on sale of long-term investment | $ | 6,423 | ** | $ | — | ||||||||||||||||||||||||||||||
| Interest income, net | $ | 1,241 | (5.7) | % | $ | 1,316 | |||||||||||||||||||||||||||||
| Other income (expense), net | $ | 70 | ** | $ | (198) | ||||||||||||||||||||||||||||||
** Percentage change not meaningful.
During the three months ended March 29, 2026, we sold our strategic long-term investment. Upon completion of the sale, we received total cash proceeds of $18.9 million and recognized a realized gain of $6.4 million, representing the excess of proceeds received over the carrying value of the investment.
Interest income, net slightly decreased for the three months ended March 29, 2026 compared to the prior year period, primarily due to the declines in interest rates.
31
Table of Contents
Provision for Income Taxes
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 29, 2026 | % Change | March 30, 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except percentage data) | |||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 415 | (17.3) | % | $ | 502 | |||||||||||||||||||||||||||||
| Effective tax rate | 2.7 | % | (150.8) | % | |||||||||||||||||||||||||||||||
Provision for income taxes decreased for the three months ended March 29, 2026, compared to the prior year period, primarily due to the elimination of the mandatory capitalization of research and development expenses, resulting in higher current deductions, lower taxable income and a reduced income tax provision. The higher effective tax rate for the three months ended March 29, 2026, compared to the U.S. federal income tax rate, is primarily driven by the shift from a relatively small pre-tax loss in the prior year period to a larger pre-tax profit in the current period.
Although we have recently generated cumulative pre-tax income, we determined that we have not yet demonstrated a sustained level of profitability sufficient to support realization of the deferred tax assets. We also considered forecasted future taxable income; however, such projections are inherently uncertain and do not outweigh the available negative evidence. Based on the totality of evidence, we concluded that it is not more-likely-than-not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been maintained as of March 29, 2026. There is a reasonable possibility that within the next few quarters, sufficient positive evidence will become available to reach a conclusion that all or a significant portion of the valuation allowance against our U.S. net deferred tax assets would no longer be required.
32
Table of Contents
Liquidity and Capital Resources
As of March 29, 2026, our cash and cash equivalents and short-term investments totaled $167.5 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement. The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.
We have a history of losses and may incur operating and net losses in the future. As of March 29, 2026, our accumulated deficit was $368.2 million. Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.
Material Cash Requirements
We believe that our existing sources of liquidity will be sufficient to meet our anticipated cash requirements for at least the next 12 months and beyond. However, in the future we may require or desire additional funds to support our operating expenses and capital requirements. To the extent that current and anticipated future sources of liquidity are insufficient, we may seek to raise additional funds through public or private equity. We have no commitments to obtain such additional financing and cannot provide assurance that additional financing will be available at all or, if available, that such financing would be obtainable on terms favorable to us and would not be dilutive.
Our future liquidity and cash requirements may vary from those currently planned and will depend on numerous factors, including the introduction of new products, the growth in our subscriptions and services revenue, the ability to increase our gross margin dollars, as well as cost optimization initiatives and controls over our operating expenditures. As we grow our installed base and related cost structure, there will be a need for additional working capital, hence, we may increase our product and subscription rates in the future.
Operating leases and contractual commitments
Our operating lease obligations mostly include offices, equipment, and distribution centers. Our contractual commitments are primarily inventory-related purchase obligations with suppliers.
Legal contingencies
We are, and from time to time, we may become involved in disputes, litigation, and other legal actions in the ordinary course of business. At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Significant judgment is required to determine both the probability and the estimated amount of loss. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as litigation reserves in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).
Refer to Note 8. Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report for further information about our operating leases, purchase obligations, and legal contingencies.
Stock repurchase program
On February 3, 2026, our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in March 2026 and is expected to continue through December 31, 2027 unless extended or shortened by the Board of Directors. During the three months ended March 29, 2026, we repurchased and subsequently retired 0.6 million shares of Arlo common stock for an aggregate repurchase of $8.0 million. As of March 29, 2026, $42.0 million remained available and authorized for future repurchases.
33
Table of Contents
Cash Flow
The following table presents our cash flows for the periods presented.
| Three Months Ended | |||||||||||
| March 29, 2026 | March 30, 2025 | ||||||||||
| (In thousands) | |||||||||||
Net cash provided by operating activities | $ | 27,863 | $ | 30,919 | |||||||
Net cash used in investing activities | (14,333) | (14,352) | |||||||||
| Net cash used in financing activities | (7,334) | (14,590) | |||||||||
| Net cash increase | $ | 6,196 | $ | 1,977 | |||||||
Operating activities
Net cash provided by operating activities decreased by $3.1 million for the three months ended March 29, 2026 compared to the prior year period, primarily due to unfavorable working capital movements of (i) higher accounts receivable balance primarily due to strong product sales; (ii) higher inventory purchases; and (iii) increases in deferred revenue due to the growth in our paid accounts and subscription rates; partially offset by the increase in accounts payable balances mainly due to timing of payments; partially offset by improved profitability.
Investing activities
Net cash used in investing activities was flat for the three months ended March 29, 2026 compared to the prior year period, primarily due to the payment for business combination offset by proceeds from the sale of our strategic investment and higher net proceeds from our available-for-sale securities investment.
Financing activities
Net cash used in financing activities decreased by $7.3 million for the three months ended March 29, 2026 compared to the prior year period, primarily due to lower stock repurchases offset by lower proceeds from employee stock plans.
Critical Accounting Policies and Estimates
For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies and estimates during the three months ended March 29, 2026, other than as discussed in Note 2. Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.
34
Table of Contents
Item 3.Quantitative and Qualitative Disclosures About Market Risk
During the three months ended March 29, 2026, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our management, including our CEO and our CFO, has concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were, in design and operation, effective at the reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
35
Table of Contents
PART II: OTHER INFORMATION
Item 1.Legal Proceedings
We are, and from time to time, we may become involved in disputes, litigation and other legal actions in the ordinary course of business. We are not currently party to any claim or proceedings that, in the opinion of our management, are likely to have a material adverse effect on our financial position. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. For additional discussion of certain risks associated with legal proceedings, see the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report.
Item 1A.Risk Factors
Our business, reputation, results of operations and financial condition, as well as the price of our stock, can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors.” During the three months ended March 29, 2026, there have been no significant changes to the risk factors under the heading “Risk Factors” described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes the share repurchase activity for the quarter ended March 29, 2026.
| Period | Total Number of Shares Purchased | Average Price Paid Per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||||||||||||
| January 1, 2026 - January 25, 2026 | — | $— | — | $— | ||||||||||||||||||||||
| January 26, 2026 - February 22, 2026 | — | $— | — | $— | ||||||||||||||||||||||
| February 23, 2026 - March 29, 2026 | 571,957 | $14.08 | 571,957 | $41,964,594 | ||||||||||||||||||||||
| Total | 571,957 | 571,957 | $41,964,594 | |||||||||||||||||||||||
_________________________
(1) On February 3, 2026, our Board of Directors approved a stock repurchase program of up to an aggregate of $50.0 million of shares of our common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of our common stock. The stock repurchase program is expected to continue through December 31, 2027, unless extended or shortened by the Board of Directors.
(2) Average price paid per share includes commission costs, but excludes the 1% excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022. Commission costs associated with share repurchases and excise taxes do not reduce the remaining authorized amount under our repurchase programs.
36
Table of Contents
Item 5. Other Information
Trading Arrangements
During the quarter ended March 29, 2026, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated
| Type of Trading Arrangement | ||||||||||||||||||||||||||||||||||||||
| Name and Position | Action | Action Date | Rule 10b5-1 (1) | Non-Rule 10b5-1 (2) | Total Shares of Common Stock to be Sold | Expiration Date | ||||||||||||||||||||||||||||||||
| (3) | X | (4) | ||||||||||||||||||||||||||||||||||||
| (3) | X | |||||||||||||||||||||||||||||||||||||
(1)Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
(2)“Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.
(3)Adopted for personal tax planning purposes.
(4)This plan covers shares underlying certain of Mr. Binder’s equity awards. With respect to one such equity award, this plan is designed to sell a specified percentage of the net shares underlying such equity award delivered after tax withholding, and the actual number of shares to be sold will depend on state and federal tax rates applicable on the relevant vesting date. With respect to all of the equity awards in this plan, Mr. Binder has designated certain target prices for the sale of shares, and if our stock is not trading at or above such target prices, the shares cannot be sold.
37
Table of Contents
Item 6.Exhibits
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
Exhibit Number | Exhibit Description | Form | Date | Number | Filed Herewith | |||||||||||||||||||||||||||
3.1 | Amended and Restated Certificate of Incorporation of Arlo Technologies, Inc. | 8-K | 8/7/2018 | 3.1 | ||||||||||||||||||||||||||||
3.2 | Amended and Restated Bylaws of Arlo Technologies, Inc. | 8-K | 4/7/2026 | 3.1 | ||||||||||||||||||||||||||||
4.1 | Common Stock Certificate of Arlo Technologies, Inc. | S-1/A | 7/23/2018 | 4.1 | ||||||||||||||||||||||||||||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | X | ||||||||||||||||||||||||||||||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer | X | ||||||||||||||||||||||||||||||
32.1# | Section 1350 Certification of Principal Executive Officer | X | ||||||||||||||||||||||||||||||
32.2# | Section 1350 Certification of Principal Financial Officer | X | ||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||
| # | This certification is deemed to accompany this Quarterly Report on Form 10-Q and will not be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section. This certification will not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. | |||||||||||||||||||||||||||||||
38
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ARLO TECHNOLOGIES, INC. | ||
| Registrant | ||
| /s/ MATTHEW MCRAE | ||
| Matthew McRae | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| /s/ KURTIS BINDER | ||
| Kurtis Binder | ||
Chief Financial Officer and Chief Operating Officer | ||
| (Principal Financial and Accounting Officer) | ||
Date: May 7, 2026
39
FAQ
How did Arlo Technologies (ARLO) perform in Q1 2026?
Arlo posted revenue of $150.4 million, up 26.3% year over year, and net income of $14.9 million. Subscriptions and services contributed $90.1 million, while products added $60.3 million, resulting in a total gross margin of 48.3% for the quarter.
How fast are Arlo’s subscriptions and annual recurring revenue growing?
Arlo ended Q1 2026 with 6.0 million cumulative paid accounts, up 22.6% from 4.9 million a year earlier. Annual recurring revenue reached $356.9 million, a 29.2% increase year over year, reflecting higher paid accounts and stronger average revenue per user.
What acquisitions did Arlo (ARLO) complete or sign in early 2026?
Arlo closed an asset purchase of Canary Connect, Inc. with total consideration of $48.9 million, including cash and fixed deferred payments. It also signed a Merger Agreement to acquire Aloe Care Health, Inc. for $15 million cash plus up to $25 million in contingent earnout.
What is Arlo’s cash position and debt capacity as of March 29, 2026?
As of March 29, 2026, Arlo held $167.5 million in cash, cash equivalents and short-term investments. It also had a three-year revolving credit facility of up to $45.0 million with HSBC, fully undrawn at quarter-end, secured by substantially all company assets.
Did Arlo Technologies repurchase shares in Q1 2026?
Yes. Under a $50.0 million stock repurchase authorization, Arlo bought back and retired 571,957 shares during Q1 2026 for an aggregate cost of about $8.0 million. Approximately $42.0 million remained authorized for future repurchases at quarter-end.
How concentrated is Arlo’s customer base according to the 10-Q?
In Q1 2026, one customer accounted for 40% of total revenue. As of March 29, 2026, a single customer represented 60% of total accounts receivable. No other customer reached 10% of revenue or receivables, highlighting meaningful customer concentration.