Arlo Technologies’s (NYSE:ARLO) Q3 Sales Beat Estimates

Core Insights - Arlo Technologies has shown a slowdown in demand with an annualized revenue growth of 3.6% over the last two years, which is below its five-year trend [1] - The company reported a compounded annual growth rate of 6.9% in sales over the past five years, indicating slightly better demand than the average in the business services sector [2] - Arlo Technologies generated $509.6 million in revenue over the past 12 months, positioning it as a smaller player in the business services space, which can limit its competitive advantages [3] Financial Performance - In Q3 CY2025, Arlo Technologies reported revenue of $139.5 million, reflecting a year-on-year growth of 1.4%, which exceeded Wall Street's estimates by 0.6% [6][7] - The company’s annual recurring revenue (ARR) reached $323 million, marking a 34% year-on-year increase, with a non-GAAP subscriptions and services gross margin of over 85% [5] - Adjusted EPS for Q3 was $0.16, surpassing analysts' expectations by 8%, and the company anticipates a revenue of approximately $136 million for the next quarter [6][19] Profitability Metrics - Arlo Technologies achieved a breakeven operating margin in Q3, which improved by 4.1 percentage points year-on-year, indicating enhanced operational efficiency [14] - The company has struggled with an average operating margin of negative 7.3% over the last five years, but it has seen a 13.5 percentage point increase in operating margin over this period [12][13] - EPS has transitioned from negative to positive over the last five years, with a remarkable 120% compounded annual growth rate in EPS over the last two years, indicating improved profitability per share [15][16] Future Outlook - Analysts project an 11.9% year-on-year increase in sales for the next quarter and an overall revenue growth of 8.3% over the next 12 months, suggesting optimism regarding the company’s newer products and services [7][8] - The company’s guidance for full-year EPS is expected to grow by 25.6% over the next 12 months, reflecting positive sentiment from Wall Street [18]