Arlo Technologies' Share Price: A Closer Look at its Valuation and Outlook

Arlo Technologies' share price has increased significantly, bringing the company closer to its yearly peak. The stock seems fairly valued according to our valuation model, trading around 10% below our intrinsic value. However, there may be an opportunity to buy in the future due to the company's high beta, which means its price movements will be exaggerated relative to the market. With muted revenue growth expected in the upcoming year, short-term growth is not a key driver for a buy decision.

Arlo Technologies (ARLO) reported its second-quarter 2025 earnings, showcasing a notable performance with earnings per share (EPS) of $0.17, surpassing the forecast of $0.15. The company also exceeded revenue expectations, reporting $129.4 million against a forecast of $123.33 million. Following the earnings announcement, Arlo’s stock rose by 2.05% in aftermarket trading, closing at $16.43. This positive market reaction underscores investor confidence in Arlo’s growth trajectory, driven by strong financial results and strategic initiatives.

Key Takeaways:
- Arlo Technologies reported a 13.33% EPS surprise in Q2 2025.
- Revenue increased to $129.4 million, exceeding forecasts by 4.92%.
- Stock price rose by 2.05% in aftermarket trading, reflecting positive investor sentiment.
- Service revenue grew by 30% year-over-year, contributing significantly to overall performance.
- The company announced a strategic partnership with ADT, enhancing its competitive position.

Company Performance:
Arlo Technologies demonstrated robust performance in Q2 2025, marked by significant revenue and earnings growth. The company’s strategic focus on expanding its product offerings and enhancing service revenues has paid off, as evidenced by a 30% year-over-year increase in service revenue. The successful execution of its largest product launch in history, featuring over 100 new SKUs, has positioned Arlo well within the competitive landscape.

Financial Highlights:
- Revenue: $129.4 million, up year-over-year
- Earnings per share: $0.17, a 70% increase year-over-year
- Service revenue: $78 million, 30% year-over-year growth
- Annual Recurring Revenue (ARR): $316 million, 34% year-over-year growth
- Adjusted EBITDA: $18 million, 82% year-over-year increase
- Gross margin: 46%, an increase of 800 basis points year-over-year

Earnings vs. Forecast:
Arlo Technologies reported an EPS of $0.17, beating the forecasted $0.15 by 13.33%. The revenue of $129.4 million surpassed expectations of $123.33 million, marking a 4.92% surprise. This performance indicates a strong quarter for Arlo, continuing its trend of exceeding market expectations.

Market Reaction:
Following the earnings release, Arlo’s stock increased by 2.05% in aftermarket trading, closing at $16.43. This price movement reflects investor enthusiasm about the company’s ability to surpass earnings and revenue forecasts. The stock’s performance is notable against its 52-week range, with a high of $17.983 and a low of $7.84, indicating a positive trajectory.

Outlook & Guidance:
Arlo Technologies has raised its full-year service revenue guidance to $310 million, expecting 5-10% growth. The company anticipates a year-end ARR of $335 million. For Q3, Arlo projects revenue between $133 million and $143 million, with non-GAAP EPS guidance ranging from $0.12 to $0.18. This outlook reflects confidence in continued growth and strategic execution.

Executive Commentary:
CEO Matthew McCray stated, "Arlo just reported the best first half in our corporate history," highlighting the company’s strong performance and strategic milestones. COO/CFO Kurt Binder emphasized, "Our extraordinary transformation to a subscriptions and services organization underpins our success," underscoring the importance of service revenue in Arlo’s growth strategy.

Risks and Challenges:
- Supply chain disruptions could impact product availability and pricing.
- Market saturation in certain segments may limit growth opportunities.
- Macroeconomic factors, such as inflation, could affect consumer spending.
- Competitive pressures from established players in the smart home technology market.
- Dependence on strategic partnerships for growth, such as the agreement with ADT.

References:
[1] https://finimize.com/content/arlo-technologies-tops-expectations-with-subscription-driven-growth
[2] https://ca.investing.com/news/transcripts/earnings-call-transcript-arlo-technologies-q2-2025-sees-earnings-beat-stock-rises-93CH-4146768