Arlo Technologies Faces Challenges Amid Service Revenue Growth
Arlo Technologies (ARLO) saw its stock drop 12.9% over the past month, while the broader Zacks Computer & Technology sector gained 2.4%. Similarly, the Zacks Internet – Software industry experienced a slight decline of 0.8% during the same period.
In contrast to Arlo, key competitors like Amazon (AMZN) and Logitech International (LOGI) have demonstrated stronger performance, with Amazon’s shares rising 0.7% and Logitech increasing by 1.2% over the last month.
Arlo’s poor performance can largely be linked to consumer preference shifts towards more affordable products. This change has led to lower average selling prices, which in turn has negatively impacted product revenues.
However, there is a silver lining for Arlo Technologies in the form of impressive growth in its services division. The company reported record service revenue, increased paid subscribers, and a successful launch of Arlo Secure 5.0.
Arlo Technologies, Inc. Price and Consensus
Arlo Technologies, Inc. price-consensus-chart | Arlo Technologies, Inc. Quote
Record Service Revenues Drive Arlo’s Growth
The surge in Arlo Technologies’ services business has been pivotal to its recent success. In the third quarter of 2024, service revenues reached an all-time high of $61.9 million, reflecting a 21% year-over-year increase. This growth was primarily fueled by a rise in paid subscribers and an increase in the number of customers opting for premium plans.
The company added 255,000 paid subscribers, marking a significant 70% increase from the previous year, which brought its total to 4.2 million subscribers. This shift toward premium plans increased the average revenue per user (ARPU) to a high of $12.24 per month, highlighting the increasing value of its subscriber base.
The launch of Arlo Secure 5.0 has played a key role in this success. The new service introduces advanced features like person and vehicle recognition, custom AI detection models, and enhanced widgets for iOS and Android. Early adoption of these features has driven an influx of subscribers to premium plans and significantly boosted ARPU.
Collaboration with Allstate Enhances Security Offerings
ARLO has teamed up with Allstate (ALL) to provide security solutions for Allstate’s 6 million home insurance customers. This partnership is a strategic move that has contributed to Arlo’s growth.
In November 2024, ARLO and Allstate launched the Arlo Total Security bundle, which includes 24/7 professional monitoring and essential hardware for smarter home protection. This collaboration combines Arlo’s advanced security technology with Allstate’s trusted protection plans, offering customers enhanced peace of mind.
Positive Earnings Estimates for ARLO
The Zacks Consensus Estimate for Arlo Technologies’ 2025 revenues stands at $513.50 million, indicating a modest year-over-year growth of 0.59%. Additionally, the estimate for 2025 earnings is 56 cents per share, unchanged in the last month, representing a promising year-over-year increase of 36.59%.
For the latest EPS estimates and surprises, check the Zacks Earnings Calendar.
Zacks Ranks ARLO as a Strong Buy
Currently, ARLO holds a Zacks Rank of #1 (Strong Buy) and boasts a Growth Score of B, indicating a favorable investment opportunity. For more details, see the complete list of today’s Zacks #1 Rank stocks here.
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The views and opinions expressed herein are those of the author and do not necessarily Reflect those of Nasdaq, Inc.
