Arlo Technologies (ARLO) has completed a fundamental shift in its revenue mix, with subscription services now accounting for roughly 60% of total revenue and growing about 20% year-over-year, according to CEO Matt McRae at Citi’s 2026 Global TMT Conference on September 9.
Services revenue crossed hardware revenue approximately two years ago, around 2024, marking a turning point for the smart-home security company, which spun out from Netgear around 2018. The transition has been margin-accretive: blended gross margin has expanded from 30% to 50%, with a long-range target of 60%. Operating margin moved from negative territory to nearly 20% in the latest quarter, with a longer-term goal of 25% or higher.
Paid subscribers stand at approximately 2.5 million, with a long-range target of more than 10 million. Annual recurring revenue aims to reach $700 million. Customer lifetime value was cited at roughly $976 last quarter against a customer acquisition cost of $200–$300, yielding an LTV-to-CAC ratio of about 4x, within a target band of 3x to 5x.
Average revenue per user in retail and direct channels sits just above $15, up from about $11 two years prior, though McRae noted that competitors in the broader installer-based security space typically charge $40–$70 monthly — a gap he sees as upside potential.
Growth will come from both partners and direct channels. Arlo expects 60% of incremental revenue toward its long-range plan to come from strategic partnerships and 40% from retail and direct. Among its largest partnerships is Comcast, which has 31 million broadband subscribers; integration is underway with a planned launch in mid-2027. Arlo also serves as the primary camera provider for Verisure, which has more than 6 million European subscribers.
On the product side, Arlo Secure 7 is launching in the coming weeks, introducing granular "threat assessment" features that score events rather than issuing binary alerts — a change McRae suggested could drive ARPU expansion. Arlo Secure 8 is expected to deepen smart-home integration further. The company also highlighted AI micro-models, which allow users to tailor models to specific monitoring needs without feeding data into the central model.
Looking beyond security, Arlo’s acquisition of Aloe Care Health adds a senior-living hub featuring motion monitoring, two-way calling, AI-powered transcription, caregiver alerting, and emerging fall-prediction capabilities. The "age in place" market is currently valued at $26–27 billion in the U.S. and projected to approach $300 billion within five to ten years, as one in five to one in four Americans is expected to be over 60 within that timeframe.
A new hardware platform is planned for the third quarter of 2027. Arlo’s stock has gained 86% year-to-date and 8.2% over the past week, but remains down 19.4% over the past year.
