Arlo's Q1 2025 Earnings: Unpacking Contradictions on Tariffs, Inventory, and Revenue Growth

Tariffs and inventory strategy, Arlo Secure 5 impact on ARPU, inventory management and tariffs, tariff impact and product strategy, subscription and service revenue projections are the key contradictions discussed in Arlo's latest 2025Q1 earnings call.



Subscription and Services Growth:
- Arlo Technologies reported 298,000 new subscribers in Q1 2025, ending the quarter with 4.9 million paid accounts, representing a 51% increase year-over-year.
- The growth in subscriptions and services revenue, which reached $69 million for the quarter, was driven by the success of Arlo Secure 5 plans and new service plans that increased Average Revenue per User (ARPU) to a record $13.48.

Impact of Tariffs and Competitive Landscape:
- Arlo Technologies expects that less than 25% of its revenue from hardware devices will be directly impacted by announced tariffs, with the majority of its profit coming from services.
- The company believes the tariffs will have a minimal impact on its consolidated gross margins and potentially presents opportunities to capture market share as competitors struggle with higher costs.

International Revenue and Strategic Partnerships:
- Arlo's international revenue generated from EMEA region, primarily through Verisure, declined to $51 million, representing 43% of total revenue compared to 56% in the prior year.
- Verisure's destocking and regulatory requirements affected product sales, but the company remains optimistic about maintaining a strong relationship and expects to achieve growth in this segment in 2025.

Ad Platform and Product Strategy:
- Arlo's ad platform, focused initially on promoting its own services and hardware, will debut in Q2, aiming to enhance customer engagement and conversion rates.
- The company plans to refresh its product portfolio in the second half of the year, reducing bill of materials (BOM) costs by between 20% to 35%, which will help mitigate tariff impacts and enhance competitive positioning.