Arlo Technologies, Inc.

Previous wording

Since the launch of our first product in December 2014, we have shipped over 45.6 million smart security devices. As of June 28, 2026, the Arlo platform had approximately 13.6 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 6.3 million cumulative paid accounts and annual recurring revenue (“ARR”) of $365.0 million.

Current wording

Since the launch of our first product in December 2014, we have shipped over 46.9 million smart security devices. As of September 27, 2026, the Arlo platform had approximately 14.2 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 6.6 million cumulative paid accounts and annual recurring revenue (“ARR”) of $369.9 million.

Previous wording

We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and we primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, strategic partners, security solution providers, and Arlo’s direct to consumer store. For the three months ended June 28, 2026 and June 29, 2025, we generated total revenue of $155.9 million and $129.4 million, respectively, and income from operations was $2.5 million and $1.9 million, respectively. For the six months ended June 28, 2026 and June 29, 2025, we generated total revenue of $306.3 million and $248.5 million, respectively, and income from operations was $10.0 million and $0.5 million, respectively.

Current wording

We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and we primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, strategic partners, security solution providers, and Arlo’s direct to consumer store. For the three months ended September 27, 2026 and September 28, 2025, we generated total revenue of $149.2 million and $139.5 million, respectively, and income from operations was $1.0 million and $0.9 million, respectively. For the nine months ended September 27, 2026 and September 28, 2025, we generated total revenue of $455.5 million and $388.0 million, respectively, and income from operations was $11.0 million and $1.4 million, respectively.

Previous wording

We operate as one operating and reportable segment. The following table sets forth, for the periods presented, the unaudited condensed consolidated statements of operations and comprehensive income (loss) data, which we derived from the accompanying unaudited condensed consolidated financial statements:

Current wording

We operate as one operating and reportable segment. The following table sets forth, for the periods presented, the unaudited condensed consolidated statements of operations and comprehensive income data, which we derived from the accompanying unaudited condensed consolidated financial statements:

Previous wording

We conduct business across three geographic regions—(i) the Americas; (ii) EMEA; and (iii) APAC—and generally base revenue by geographic region on the bill-to location of the customer for device location for subscriptions and services sales and device sales.

Current wording

We conduct business across three geographic regions—(i) the Americas; (ii) EMEA; and (iii) APAC—and generally base revenue by geographic region on the bill-to location of the customer for device sales and the device location for subscriptions and services sales.

Previous wording

Subscriptions and services revenue increased by $14.9 million or 19.0%, and $36.1 million or 24.6%, for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by a 23.2% increase in cumulative paid accounts and the growth in average revenue per user (“ARPU”) on retail and direct paid subscription services, reflecting a higher volume of annual plan renewals.

Current wording

Subscriptions and services revenue increased by $16.1 million or 20.1%, and $52.2 million or 23.0%, for the three and nine months ended September 27, 2026, respectively, compared with the prior year periods. The increases were primarily driven by a 23.1% increase in cumulative paid accounts and the growth in average revenue per user (“ARPU”) on retail and direct paid subscription services, reflecting a higher volume of annual plan renewals. The increase for the nine months ended September 27, 2026 was also attributable to non-recurring engineering services revenue associated with our strategic partners.

Previous wording

Products revenue increased by $11.7 million or 22.8%, and $21.7 million or 21.4%, for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by higher product shipments to our largest customer in EMEA, reflecting stronger customer demand, as well as lower sales incentives and sales returns in retail channels, both of which are recorded as reductions of revenue. These increases were partially offset by lower average selling prices (“ASPs”) for our products sold through retail channels as we continued promotional activities to stimulate household acquisition and subscriber growth.

Current wording

Products revenue increased by $15.3 million or 9.5% for the nine months ended September 27, 2026, compared with the prior year period. The increase was primarily driven by higher product shipments to our largest customer in EMEA, reflecting stronger customer demand, as well as lower sales incentives and sales returns in retail channels, both of which are recorded as reductions of revenue. The increase was partially offset by lower ASPs for our products sold through retail channels as we continued promotional activities to stimulate household acquisition and subscriber growth.

Previous wording

Our cost of revenue as a percentage of revenue can vary based upon a number of factors, including those that may affect our revenue set forth above and factors that may affect our cost of revenue, including, without limitation, product mix, sales channel mix, registered accounts’ acceptance of paid subscription service offerings, and changes in our cost of goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freight, duty and tariff costs, and charges for excess or obsolete inventory. We outsource our manufacturing, warehousing, and distribution logistics. We also outsource certain components of the required infrastructure to support our cloud-based back-end IT infrastructure. We believe this outsourcing strategy generally allows us to better manage our products cost and subscriptions and services cost and gross margin and allows us to adapt to changing market dynamics and supply chain constraints. However, with respect to manufacturing that we have outsourced to ex-U.S. manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.

Current wording

Our cost of revenue as a percentage of revenue can vary based upon a number of factors, including those that may affect our revenue set forth above and factors that may affect our cost of revenue, including, without limitation, product mix, sales channel mix, registered accounts’ acceptance of paid subscription service offerings, and changes in our cost of goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freight, duty and tariff costs, and charges for excess or obsolete inventory. More recently, constraints in the memory supply market have resulted in increased memory costs, and such costs may continue to adversely affect our products cost and gross margin. We outsource our manufacturing, warehousing, and distribution logistics. We also outsource certain components of the required infrastructure to support our cloud-based back-end IT infrastructure. We believe this outsourcing strategy generally allows us to better manage our products cost and subscriptions and services cost and gross margin and allows us to adapt to changing market dynamics and supply chain constraints. However, with respect to manufacturing that we have outsourced to ex-U.S. manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.

Previous wording

Subscriptions and services cost of revenue increased by 43.7% and 31.7% for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by growth in subscriptions and services revenue and continued investments in platform services to support subscription-based business growth and improve customer experience.

Current wording

Subscriptions and services cost of revenue increased by 46.6% and 36.7% for the three and nine months ended September 27, 2026, respectively, compared with the prior year periods. The increases were primarily driven by growth in subscriptions and services revenue and continued investments in platform services to support subscription-based business growth and improve customer experience.

Previous wording

Products cost of revenue increased by 6.8% and 11.5% for the three and six months ended June 28, 2026, respectively, compared with the prior year periods, The increases were primarily driven by higher product shipments and partially offset by an $8.0 million tariff refund recorded as a reduction of cost of revenue and coupled with lower freight-in costs resulting from increased use of ocean freight. For the six months ended June 28, 2026, the increase was also partially offset by lower product warranty and inventory reserves.

Current wording

Products cost of revenue decreased by 12.7% for the three months ended September 27, 2026, compared with the prior year period. The decrease was primarily driven by tariff refunds of $6.3 million recorded as a reduction of cost of revenue coupled with lower freight-in costs resulting from increased use of ocean freight, partially offset by higher inventory reserves as we head into a higher promotional holiday season.

Previous wording

Subscriptions and services gross profit increased by $9.5 million and $28.4 million for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by growth in subscriptions and services revenue, partially offset by higher subscriptions and services cost of revenue as we continued investing in platform services to support subscription-based business growth and improve customer experience.

Current wording

Subscriptions and services gross profit increased by $10.3 million and $38.7 million for the three and nine months ended September 27, 2026, respectively, compared with the prior year periods. The increases were primarily driven by growth in subscriptions and services revenue, partially offset by higher subscriptions and services cost of revenue as we continued investing in platform services to support subscription-based business growth and improve customer experience.

Previous wording

Products gross profit increased by $7.6 million and $8.7 million for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by the $8.0 million tariff refund recorded as a reduction of cost of revenue, lower freight-in costs resulting from increased use of ocean freight, and lower product warranty and inventory reserves. These increases were partially offset by lower ASPs for our products sold through retail channels as we continued promotional activities to stimulate household acquisition and subscriber growth.

Current wording

Products gross profit increased by $2.6 million and $11.3 million for the three and nine months ended September 27, 2026, respectively, compared with the prior year periods. Product gross profit was favorably impacted by tariff refunds of $6.3 million and $14.2 million recorded as a reduction of cost of revenue for the three and nine months ended September 27, 2026, respectively. These increases were partially offset by lower ASPs for our products sold through retail channels as we continued promotional activities to stimulate household acquisition and subscriber growth, as well as higher inventory valuation adjustments as we head into a higher promotional holiday season.

Previous wording

Research and development expense increased by $5.2 million for the three months ended June 28, 2026 compared to the prior year period, primarily due to increases of $2.2 million in stock-based compensation and $1.0 million in payroll-related compensation, driven by headcount growth, as well as a $1.6 million increase in outside professional services as we continued to invest in platform services to support our subscription business.

Current wording

Research and development expense increased by $4.6 million for the three months ended September 27, 2026 compared to the prior year period, primarily due to increases of $2.8 million in stock-based compensation as a result of the achievement of certain performance-based equity award targets, $0.7 million in payroll-related compensation which was driven by headcount growth, and $1.0 million in outside professional services as we continued to invest in platform services to support our subscription business.

Previous wording

Research and development expense increased by $11.8 million for the six months ended June 28, 2026 compared to the prior year period, primarily due to increases of $5.5 million in stock-based compensation and $3.5 million in payroll-related compensation, driven by headcount growth, as well as a $2.3 million increase in outside professional services as we continued to invest in platform services to support our subscription business.

Current wording

Research and development expense increased by $16.4 million for the nine months ended September 27, 2026 compared to the prior year period, primarily due to increases of $8.3 million in stock-based compensation as a result of the achievement of certain performance-based equity award targets, $4.2 million in payroll-related compensation which was driven by headcount growth, and $3.8 million in outside professional services as we continued to invest in platform services to support our subscription business.

Previous wording

Sales and marketing expense increased by $3.0 million for the three months ended June 28, 2026 compared to the prior year period, primarily due to increases of $0.8 million in stock-based compensation and $0.7 million in payroll-related compensation, driven by headcount growth, as well as increases of $0.6 million in marketing expenditures and $0.4 million in professional services as we continued to invest in customer experience improvements.

Current wording

Sales and marketing expense increased by $2.5 million for the three months ended September 27, 2026 compared to the prior year period, primarily due to increases of $0.8 million in stock-based compensation as a result of the achievement of certain performance-based equity award targets, $0.8 million in payroll-related compensation which was driven by headcount growth, and $0.7 million in professional services as we continued to invest in customer experience improvements.

Previous wording

Sales and marketing expense increased by $5.4 million for the six months ended June 28, 2026 compared to the prior year period, primarily due to increases of $1.5 million in marketing expenditures; $1.2 million in credit card and in-app processing fees, driven by an increase in paid accounts and focused efforts to improve the customer app experience; $0.9 million in stock-based compensation and $0.7 million in payroll-related compensation, driven by headcount growth; and $0.7 million in professional services as we continued to invest in customer experience improvements.

Current wording

Sales and marketing expense increased by $8.0 million for the nine months ended September 27, 2026 compared to the prior year period, primarily due to increases of $1.7 million in stock-based compensation as a result of the achievement of certain performance-based equity award targets, $1.5 million in payroll-related compensation which was driven by headcount growth, $1.4 million in professional services as we continued to invest in customer experience improvements, $1.4 million in marketing expenditures, $0.9 million in credit card and in-app processing fees which was driven by an increase in paid accounts and focused efforts to improve the customer app experience, $0.7 million in IT and facilities overhead related to allocations associated with corporate infrastructure, and $0.4 million in freight-out expenses.

Previous wording

General and administrative expense increased by $7.2 million for the six months ended June 28, 2026 compared to the prior year period, primarily due to increases of $2.5 million in stock-based compensation and $1.0 million in payroll-related compensation, driven by headcount growth, as well as a $4.4 million increase in legal professional services. The increase was partially offset by a $0.5 million decrease in IT and facilities overhead related to allocations associated with corporate infrastructure.

Current wording

General and administrative expense increased by $7.3 million for the three months ended September 27, 2026 compared to the prior year period, primarily due to increases of $3.6 million in stock-based compensation as a result of the achievement of certain performance-based equity award targets, $1.9 million in payroll-related compensation which was driven by headcount growth, $1.4 million in legal professional services, and $0.4 million in IT and facilities overhead related to allocations associated with corporate infrastructure.

Previous wording

General and administrative expense increased by $6.8 million for the three months ended June 28, 2026 compared to the prior year period, primarily due to increases of $3.4 million in stock-based compensation and $0.8 million in payroll-related compensation, driven by headcount growth, as well as a $2.4 million increase in legal professional services.

Current wording

General and administrative expense increased by $14.5 million for the nine months ended September 27, 2026 compared to the prior year period, primarily due to increases of $6.8 million in stock-based compensation as a result of the achievement of certain performance-based equity award targets, $2.1 million in payroll-related compensation which was driven by headcount growth, and $5.7 million in legal professional services.

Previous wording

Interest income, net slightly decreased for the three and six months ended June 28, 2026 compared to the prior year periods, primarily due to the decline in interest rates.

Current wording

Interest income, net decreased for the three and nine months ended September 27, 2026 compared to the prior year periods, primarily due to declines in interest rates and investment balances.

Previous wording

Provision (benefit) for income taxes increased for the three and six months ended June 28, 2026 compared to the prior year periods, primarily due to higher pre-tax income in the current periods and the prior year three-month period’s income tax benefit. The effective tax rate for the six months ended June 28, 2026 was lower than the U.S. federal income tax rate primarily due to earnings generated in lower-tax foreign jurisdictions and the continued impact of valuation allowances recorded against substantially all of our U.S. deferred tax assets and certain foreign tax attributes.

Current wording

The effective tax rate for the three months ended September 27, 2026 was higher than the U.S. federal statutory rate of 21% primarily due to cumulative research and development tax credit adjustments recorded in the quarter ended September 27, 2026 and the lower pre-tax income, which magnified the effect of discrete and non-deductible items on the rate. These increases were partially offset by earnings in foreign jurisdictions subject to lower tax rates and the continued impact of the valuation allowance. The effective tax rate for the nine months ended September 27, 2026 was lower than the U.S. federal statutory rate of 21% primarily due to earnings generated in lower-tax foreign jurisdictions and the continued impact of valuation allowances recorded against substantially all of our U.S. deferred tax assets and certain foreign tax attributes.

Previous wording

As of June 28, 2026, our cash and cash equivalents and short-term investments totaled $141.1 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement. The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.

Current wording

As of September 27, 2026, our cash and cash equivalents and short-term investments totaled $144.0 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement. The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.

Previous wording

We have a history of losses and may incur operating and net losses in the future. As of June 28, 2026, our accumulated deficit was $365.1 million. Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.

Current wording

We have a history of losses and may incur operating and net losses in the future. As of September 27, 2026, our accumulated deficit was $364.3 million. Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.

Previous wording

We are, and from time to time, we may become involved in disputes, litigation, and other legal actions in the ordinary course of business. At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Significant judgment is required to determine both the probability and the estimated amount of loss. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as litigation reserves in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

Current wording

We are, and from time to time, we may become involved in disputes, litigation, and other legal actions in the ordinary course of business. At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Significant judgment is required to determine both the probability and the estimated amount of loss. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as litigation reserves in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income.

Previous wording

On February 3, 2026, our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in March 2026 and is expected to continue through December 31, 2027 unless extended or shortened by the Board of Directors. During the six months ended June 28, 2026, we repurchased and subsequently retired 2.3 million shares of Arlo common stock for an aggregate repurchase of $29.9 million. As of June 28, 2026, $20.1 million remained available and authorized for future repurchases.

Current wording

On February 3, 2026, our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in March 2026 and is expected to continue through December 31, 2027 unless extended or shortened by the Board of Directors. During the nine months ended September 27, 2026, we repurchased and subsequently retired 3.3 million shares of Arlo common stock for an aggregate repurchase of $44.0 million. As of September 27, 2026, $6.0 million remained available and authorized for future repurchases.

Previous wording

Net cash provided by operating activities decreased by $0.5 million for the six months ended June 28, 2026 compared with the prior year period. The decrease was primarily driven by improved profitability offset by unfavorable working capital movements, including higher accounts receivable balances resulting from strong product sales and higher inventory purchases, which were partially offset by an increase in accounts payable balances, primarily due to the timing of payments.

Current wording

Net cash provided by operating activities increased by $0.6 million for the nine months ended September 27, 2026 compared with the prior year period. The increase was primarily driven by improved profitability offset by unfavorable working capital movements, including the decrease in accounts payable balances mainly due to timing of payments, higher inventory purchases and lower accounts receivable balance primarily due to strong collections.

Previous wording

Net cash used in investing activities increased by $17.4 million for the six months ended June 28, 2026 compared with the prior year period. The increase was primarily attributable to cash paid for business acquisitions and lower net proceeds from available-for-sale securities, partially offset by proceeds from the sale of a strategic investment.

Current wording

Net cash used in investing activities increased by $51.6 million for the nine months ended September 27, 2026 compared with the prior year period. The increase was primarily attributable to cash paid for business acquisitions and lower net proceeds from available-for-sale securities, partially offset by proceeds from the sale of a strategic investment.

Previous wording

Net cash used in financing activities increased by $14.5 million for the six months ended June 28, 2026 compared with the prior year period, primarily due to higher repurchases of common stock.

Current wording

Net cash used in financing activities increased by $17.9 million for the nine months ended September 27, 2026 compared with the prior year period, primarily due to higher repurchases of common stock.

Previous wording

For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies and estimates during the six months ended June 28, 2026, other than as discussed in Note 2. Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.

Current wording

For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies and estimates during the nine months ended September 27, 2026, other than as discussed in Note 2. Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.