Security technology and services company ADT (NYSE: ADT) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 6.5% year on year to $1.27 billion. The company expects the full year’s revenue to be around $5.13 billion, close to analysts’ estimates. Its non-GAAP profit of $0.32 per share was 63.7% above analysts’ consensus estimates.

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StockStory’s Take

ADT’s first quarter results were shaped by increased adoption of its new ADT Plus platform, driving higher installation revenue and improved customer retention. CEO Jim DeVries emphasized the company’s disciplined approach to balancing profitability with investment in new offerings, stating, "Our focus on unrivaled safety is and will always remain core to who we are and what we do." Management highlighted record-low attrition rates and customer satisfaction at a three-year high, supported by initiatives such as virtual service and enhanced onboarding processes.

Looking ahead, management reaffirmed its full-year guidance, citing resilient recurring revenue and ongoing efficiency initiatives despite macroeconomic uncertainty. CFO Jeff Likosar noted that the company expects potential tariff impacts to be manageable within existing guidance, explaining, “We are developing several mitigating actions to offset our gross exposure, which includes supplier negotiations, inventory management, potential source changes, and potential customer price increases or surcharges.” The leadership team also expressed confidence in further leveraging artificial intelligence to improve service efficiency and reduce operational costs.

Key Insights from Management’s Remarks

ADT’s management focused on the operational impact of its platform transition, efficiency initiatives, and product innovation, which influenced both revenue growth and customer retention in the quarter. The company’s results benefited from improved installation revenue and ongoing investments in artificial intelligence and customer experience programs.

• ADT Plus Platform Expansion: The rollout of the ADT Plus platform, now available to all new direct residential customers, led to increased installation revenue and higher average prices as more customers opted for professionally installed, comprehensive systems.
• Customer Retention and Attrition: Record-low customer attrition, at 12.6%, was attributed to improved onboarding, proactive retention programs, and customer service enhancements, including AI-enabled chat support and virtual service calls.
• AI and Operational Efficiencies: Management reported that 90% of customer service chats are now processed by AI agents, with nearly half resolved without human intervention. Early AI efforts have reduced service costs and are expanding to additional processes.
• State Farm Partnership Progress: The partnership with State Farm continued to develop, contributing to new customer additions through both professional and do-it-yourself channels, with pilots in 17 states and high customer satisfaction scores.
• Leadership Changes: The appointment of Fawad Ahmad as Chief Operating and Customer Officer and Omar Khan as Chief Business Officer was highlighted as bringing fresh expertise to the executive team, while Don Young’s upcoming departure marks a transition in operational leadership.

Drivers of Future Performance

Management’s outlook for the year centers on continued efficiency gains, the scaling of ADT Plus, and proactive risk management amid evolving external pressures such as tariffs and macroeconomic uncertainty.

• Tariff and Cost Mitigation: Potential tariff increases on imported equipment are expected to be offset by supplier negotiations, inventory management, and selective price adjustments for customers. Management believes these actions should keep overall results within guided ranges.
• AI-Driven Service Enhancements: The company plans to expand its use of artificial intelligence in customer service, aiming to further reduce operational costs and improve customer response times, with material savings anticipated in 2026 and beyond.
• Product Ecosystem Optimization: Ongoing investments in integrating legacy systems with ADT Plus and the launch of new features are expected to increase customer engagement and drive higher adoption rates for premium offerings.

Top Analyst Questions

• Ronan Kennedy (Barclays): Asked for a holistic assessment of the macro environment and customer demand; management cited business resilience and highlighted that demand for personal safety tends to be stable even in uncertain times.
• George Tong (Goldman Sachs): Queried the decline in gross recurring monthly revenue (RMR) additions; CEO Jim DeVries explained the drop was due to tighter credit standards in DIY and health segments, while core professional install ads grew year over year.
• David Page (RBC Capital Markets): Requested updates on the State Farm partnership and AI initiatives; management reported steady progress with State Farm pilots and strong early results from AI agents handling customer service chats.
• Peter Christiansen (Citigroup): Sought clarification on small business trends and the outlook for installation versus monitoring revenue mix; management noted small business attrition was stable and explained installation revenue is expected to remain elevated due to outright sales of ADT Plus systems.
• Yehuda Silverman (Morgan Stanley): Asked about record-low attrition and future improvement potential; management noted ongoing retention initiatives and aims for further attrition reductions, while clarifying their attrition calculation method versus peers.

Catalysts in Upcoming Quarters

In the upcoming quarters, the StockStory team will watch (1) the pace of adoption of the ADT Plus platform and related new features, (2) the rollout and impact of expanded AI-driven customer service solutions, and (3) the effectiveness of tariff mitigation strategies on equipment costs and profitability. Execution on leadership transitions and continued growth from partnerships like State Farm will also be important indicators of operational momentum.

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