Smart security company Arlo (NYSE: ARLO) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 16.2% year on year to $141.3 million. On top of that, next quarter’s revenue guidance ($140 million at the midpoint) was surprisingly good and 5.9% above what analysts were expecting. Its non-GAAP profit of $0.22 per share was 34% above analysts’ consensus estimates.

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Company Overview

Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $529.3 million in revenue over the past 12 months, Arlo Technologies is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, Arlo Technologies grew its sales at a solid 8.2% compounded annual growth rate over the last five years. This is an encouraging starting point for our analysis because it shows Arlo Technologies’s demand was higher than many business services companies.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Arlo Technologies’s recent performance shows its demand has slowed as its annualized revenue growth of 3.8% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

This quarter, Arlo Technologies reported year-on-year revenue growth of 16.2%, and its $141.3 million of revenue exceeded Wall Street’s estimates by 4.2%. Company management is currently guiding for a 17.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will catalyze better top-line performance.

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Operating Margin

Although Arlo Technologies was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 6.5% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Arlo Technologies’s operating margin rose by 12.9 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to show consistent profitability.

In Q4, Arlo Technologies generated an operating margin profit margin of 3.3%, up 7.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Arlo Technologies’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Arlo Technologies’s EPS grew at an astounding 61% compounded annual growth rate over the last two years, higher than its 3.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Arlo Technologies’s earnings can give us a better understanding of its performance. Arlo Technologies’s operating margin has expanded over the last two years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Arlo Technologies reported adjusted EPS of $0.22, up from $0.10 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Arlo Technologies’s full-year EPS of $0.70 to grow 11.5%.

Key Takeaways from Arlo Technologies’s Q4 Results

It was good to see Arlo Technologies beat analysts’ EPS expectations this quarter. We were also excited its EPS guidance for next quarter outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 10.9% to $13.70 immediately after reporting.

Arlo Technologies had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).