What Happened?

Shares of smart security company Arlo (NYSE: ARLO) jumped 8.4% in the afternoon session after the company reported it cleared the $300m ARR (annual recurring revenue) mark, a key milestone achieved sooner than projected in its original five-year plan. 

This growth was attributed to the continued success of its subscription services, which boasted over 5 million paid subscribers.

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What The Market Is Telling Us

Arlo Technologies’s shares are very volatile and have had 22 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 7 months ago when the stock dropped 26% on the news that the company reported disappointing third-quarter earnings. Its revenue guidance for the next quarter missed expectations, and its EBITDA fell short of Wall Street's estimates. Sales growth was modest, with product revenue declining by 4% year-on-year despite a push in service-related revenue, which represented nearly 50% of the total revenue mix. 

Profitability was also under pressure as declining hardware margins were only partially offset by gains in high-margin services. Furthermore, the company observed consumer demand shifting towards lower-priced products, prompting management to adopt aggressive promotional strategies to drive volume ahead of the holiday season. Overall, this was a weaker quarter.

Arlo Technologies is up 45.9% since the beginning of the year, and at $16 per share, it is trading close to its 52-week high of $17.10 from July 2024. Investors who bought $1,000 worth of Arlo Technologies’s shares 5 years ago would now be looking at an investment worth $5,674.

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