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(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  x

The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 105,992,268 as of October 31, 2025.

 

Item 1.Financial Statements

			Nine Months Ended
			September 28, 2025						September 29, 2024
			(In thousands)
Cash flows from operating activities:
Net income (loss)			$	9,162					$	(25,643)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation expense, net of amounts capitalized			45,133						54,159
Depreciation and amortization			2,586						2,395
Gain on early lease termination			(4,144)						—
Allowance for credit losses and non-cash changes to reserves			994						2,930
Deferred income taxes			(306)						(23)
Discount accretion on investments and other			(2,180)						(2,493)
Changes in assets and liabilities:
Accounts receivable, net			(19,400)						(3,095)
Inventories			(4,696)						(16,609)
Prepaid expenses and other assets			(883)						(2,703)
Accounts payable			14,422						38,159
Deferred revenue			12,964						6,714
Accrued and other liabilities			5,300						(9,157)
Net cash provided by operating activities			58,952						44,634
Cash flows from investing activities:
Purchases of property and equipment, including capitalized software			(9,996)						(1,612)
Purchases of short-term investments			(112,932)						(145,955)
Purchase of long-term investment			(12,500)						—
Proceeds from maturities of short-term investments			105,000						158,796
Net cash provided by (used in) investing activities			(30,428)						11,229
Cash flows from financing activities:
Proceeds related to employee benefit plans			2,280						7,113
Repurchase of common stock			(26,824)						—
Restricted stock unit withholdings			—						(42,943)
Net cash used in financing activities			(24,544)						(35,830)
Net increase in cash, cash equivalents, and restricted cash			3,980						20,033
Cash, cash equivalents, and restricted cash, at beginning of period			82,032						60,653
Cash, cash equivalents, and restricted cash, at end of period			$	86,012					$	80,686
Reconciliation of cash, cash equivalents, and restricted cash to unaudited condensed consolidated balance sheets
Cash and cash equivalents			$	86,012					$	77,032
Restricted cash			—						3,654
Total cash, cash equivalents, and restricted cash			$	86,012					$	80,686
Supplemental cash flow information:
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities			$	423					$	647
Stock-based compensation expense capitalized for software development			$	1,402					$	—

Arlo Technologies, Inc. (“we,” “our,” “us,” or “Arlo”) is transforming the ways in which people can protect everything that matters to them with home, business, and personal security services that combine a globally scaled cloud platform, monitoring and analytics capabilities, and award-winning app-controlled devices to create a personalized security ecosystem. Arlo’s experience in cloud services, AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that can be setup by the customers and engaged with every day. Our cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection.

We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, wireless carrier channels, security solution providers, and Arlo’s direct to consumer store.

Our corporate headquarters is located in Carlsbad, California, with other satellite offices across North America and various other global locations.

We prepare our unaudited condensed consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of Arlo and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 27, 2025. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods.

Our fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. We report the results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31.

Certain prior periods amounts have been reclassified to conform to the current period’s presentation. None of these reclassifications had a material impact to the unaudited condensed consolidated financial statements.

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates and operating results for the nine months ended September 28, 2025 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any future period.

Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to such policies except for the item below during the nine months ended September 28, 2025.

We invested in a strategic investment, which consists of non-marketable securities in a privately held company in which we do not have a controlling interest or significant influence. We apply the measurement alternative for non-marketable equity securities that do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. For this investment, we recognize remeasurement adjustments, including upward and downward adjustments, and impairments, if any, in other non-operating income (expense), net on the unaudited condensed consolidated statements of comprehensive income (loss).

The strategic investment is subject to periodic impairment analysis, which involves an assessment of both qualitative and quantitative factors, including the investee’s financial metrics, market acceptance of the investee’s product or technology, and the rate at which the investee is using its cash. An impairment loss is recorded when an event or circumstance indicates a decline in value has occurred. If the strategic investment is considered impaired, we will recognize an impairment through other non-operating income (expense), net on the unaudited condensed consolidated statements of comprehensive income (loss) and establish a new carrying value for the investment.

There were no accounting pronouncements adopted during the nine months ended September 28, 2025.

Disclosure Improvements. In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Among the various codification amendments, Topic 470 Debt is applicable to Arlo which requires the disclosure of amounts, terms and weighted-average interest rates of unused lines of credit. The effective date is either (i) the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or (ii) on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited. The adoption of this new standard will not have a material impact on our financial statements and related disclosures.

Income Tax Disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires on an annual basis to (1) disclose specific categories in the rate reconciliation, (2) provide additional information for reconciling items that meet a quantitative threshold, and (3) disclose income taxes paid disaggregated by jurisdiction. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.

Expense Disaggregation Disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement: Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements. This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.

Credit Losses Accounting. In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit

Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting companies to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. This guidance is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted and is effective on a prospective basis. We plan to adopt this guidance for our fiscal year beginning January 1, 2026, and we do not expect it to have a material effect on our financial statements.

Software Development Costs Accounting and Disclosure. In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to “development stages”. It also clarifies the criteria for capitalization, which begins when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. This guidance is effective for annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures.

The following table reflects the changes in contract balances for the nine months ended September 28, 2025:

Receivables are recorded in the period we deliver products or provide subscriptions and services when we have an unconditional right to payment. Contract assets are related to the value of products or subscriptions and services transferred to the customer for which the right to payment is not just dependent on the passage of time. As of September 28, 2025, there were no contract assets.

Contract liabilities are recognized when we receive payment or have an unconditional right to payment in advance of the satisfaction of performance. Contract liabilities increased primarily due to increases in subscriptions and services revenue as a result of changes in consumer subscription plans and a shift to additional annual prepaid subscriptions, as well as increases in cumulative paid accounts and rates of subscriptions. For the nine months ended September 28, 2025 and September 29, 2024, $25.6 million and $17.3 million, respectively, of the recognized revenue was included in deferred revenue at the beginning of the periods. There were no significant changes in estimates during the periods that would affect the contract balances.

The total estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied and remaining was $43.1 million as of September 28, 2025 and $29.5 million as of December 31, 2024, substantially related to performance obligations classified as less than one year.

Under the Supply Agreement with Verisure Sàrl (“Verisure”), our largest customer, a performance obligation is not deemed to exist until we receive and accept Verisure’s purchase order. As of September 28, 2025, we had a backlog of $17.6 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months.

Revenue from all sales is recognized at transaction price, the amount we expect to be entitled to in exchange for providing services or transferring goods. Transaction price is calculated as selling price net of variable consideration which includes estimates for sales incentives and sales returns related to current period products revenue. Sales incentives are determined based on a combination of the actual amounts committed and estimated future expenditure based upon historical customary business practice. Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for our products. Variable consideration estimates are based on predictive historical data or future commitments that we plan and control. However, we continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. The following tables provide activities related to sales incentives and sales returns that are recognized as contra-revenue.

We disaggregate our revenue into three geographic regions: the Americas, EMEA, and APAC, where we conduct our business. The following table presents revenue disaggregated by geographic region.

For the three months ended September 28, 2025 and September 29, 2024, one customer accounted for 36% and 42% of the total revenue, respectively. For the nine months ended September 28, 2025 and September 29, 2024, one customer accounted for 35% and 45% of the total revenue, respectively. No other customers accounted for 10% or greater of the total revenue. As of September 28, 2025, two customers accounted for 51% and 15%, and as of December 31, 2024, two customers accounted for 54% and 13% of the total accounts receivable, net. No other customers accounted for 10% or greater of the total accounts receivable, net.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.

The components of property and equipment are as follows.

For comparative purposes, amounts in prior periods have been recast.

Depreciation and amortization expense pertaining to property and equipment are as follows:

We have determined that no event occurred or circumstances changed during the nine months ended September 28, 2025 that would more likely than not reduce the fair value of goodwill below the carrying amount. There was no accumulated goodwill impairment recognized as of September 28, 2025.

The following table summarizes assets measured at fair value on a recurring basis:

			As of
			September 28, 2025						December 31, 2024
			(In thousands)
Cash equivalents: money-market funds (<90 days)			$	11,573					$	4,095
Cash equivalents: U.S. Treasuries (<90 days)			20,308						22,504
Available-for-sale securities: U.S. Treasuries (1)			79,532						69,419
Total			$	111,413					$	96,018

_________________________

(1)Included in short-term investments on our unaudited condensed consolidated balance sheets.

Our investments in cash equivalents and marketable securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. As of September 28, 2025 and December 31, 2024, assets and liabilities measured as Level 2 fair value were not material.

Our strategic equity investment without readily determinable fair value is classified within Level 3 of the fair value hierarchy and the subsequent adjustment to its fair value by applying the measurement alternative will be disclosed as non-recurring fair value measurement and included in the level of the fair value hierarchy that was used. As of September 28, 2025, the carrying value of our strategic equity investment was $12.5 million. There was no observable price change or impairment during the nine months ended September 28, 2025.

On November 14, 2024, we entered into a credit agreement (the “Credit Agreement”) with HSBC Bank USA, National Association, as administrative agent, issuing bank, and lender. The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) of up to $45.0 million that matures on November 14, 2027, which also includes a $10.0 million sublimit for the issuance thereunder of letters of credit. As of September 28, 2025, we had unused borrowing capacity of $45.0 million based on the terms and conditions of the Credit Agreement. In addition, the Credit Agreement includes an uncommitted accordion feature that allows us to, from time to time, request an increase to the aggregate revolving loan commitments by up to an additional $30.0 million in the aggregate, subject to the satisfaction of certain conditions. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes.

The obligations under the Credit Agreement are secured by substantially all of our assets, including substantially all of the assets of a material subsidiary, Arlo Technologies International Limited, a limited corporation organized under the laws of Ireland. Borrowings under the Credit Agreement will bear interest at a floating rate equal to: (i) the term secured overnight financing rate plus the applicable rate of 2.25% to 2.75%, or (ii) the base rate plus the applicable rate of 1.25% to 1.75% both determined based on a total net leverage ratio. Among other fees, we are required to pay a quarterly unused fee of 0.20% per annum on the amount by which the lenders’ aggregate commitment under the Credit Facility exceeds the daily revolver usage during such quarter. The Credit Agreement contains events of default, representations and warranties, and affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains financial covenants that require us to (i) maintain a fixed charge coverage ratio of at least 1.50 to 1.00 and (ii) maintain a total net leverage ratio, not to exceed 3.00 to 1.00; both covenants being tested quarterly on a trailing four consecutive fiscal quarter basis.

As of September 28, 2025, we were in compliance with all the covenants under the Credit Agreement. No amount had been drawn under the Credit Facility as of September 28, 2025.

Our operating lease obligations mostly include offices, equipment, and distribution centers, with various expiration dates through June 2033. Certain lease agreements include options to renew or terminate the lease, which are generally not reasonably certain to be exercised and therefore are not factored into our determination of lease payments. The terms of certain leases provide for rental payments on a graduated scale. Gross lease expense was $1.2 million and $4.0 million for the three and nine months ended September 28, 2025, respectively, and $1.4 million and $4.2 million for the three and nine months ended September 29, 2024, respectively.

Supplemental cash flow information related to operating leases is as follows:

Weighted average remaining lease term and weighted average discount rate related to operating leases are as follows:

The future minimum undiscounted lease payments under operating leases for each of the next five years and thereafter are as follows:

In July 2025, we entered into a conditional termination agreement for our office lease located in San Jose, California. The termination became effective following the landlord’s exercise of its termination option, which exercise notice was provided in late July. Our obligation stipulated in the agreement includes a termination fee of $1.0 million and base rent through the effective date of termination, as well as vacating the premises timely. We recorded the derecognition of right-of-use assets and lease liabilities and recognized a gain of $4.1 million, net of $1.6 million write-off loss from sublease and $1.0 million lease termination fees, upon the termination effective in the third quarter of 2025. Contemporaneously with this termination, our sublease arrangement was terminated and our letter of credit in connection with this lease was released as of September 28, 2025.

We have entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. As of September 28, 2025, we had $28.9 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months.

As of September 28, 2025, an additional $15.6 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements. Consequently, we may incur expenses for the materials and components, such as chipsets already purchased by the supplier to fulfill our orders if the purchase order is cancelled. Expenses incurred have historically not been material relative to the original order value.

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 comprehensive income (loss). We monitor developments in these legal matters that could affect the estimate we had previously accrued. We currently believe that there are no existing claims or proceedings that are likely to have a material adverse effect on our financial position within the next 12 months. There are many uncertainties associated with any litigation, and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require us to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from our estimates, which could result in the need to adjust the liability and record additional expenses.

In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, distributors, resellers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising from breach of such agreements or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with members of our Board of Directors and certain of our executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited. As of September 28, 2025 and December 31, 2024, we have not incurred any material costs as a result of such indemnification obligations and we are not currently aware of any indemnification claims.

We grant options and restricted stock units (“RSUs”) under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees. We also grant performance-based and market-based restricted stock units (“PSUs”) to our executive officers and other senior employees periodically. Award vesting periods for the 2018 Plan are generally three to five years. As of September 28, 2025, 5.2 million shares were available for future grants. Options may be granted for periods of up to 10 years or such shorter term as may be provided in the agreement and at prices no less than 100% of the fair market value of Arlo’s common stock on the date of grant. Options granted under the 2018 Plan generally vest over four years, the first tranche at the end of 12 months and the remaining shares underlying the option vesting monthly over the remaining three years.

On January 24, 2025, we registered an aggregate of up to 5,050,450 shares of common stock on a Registration Statement on Form S-8, including 4,050,450 shares under the 2018 Plan and 1,000,000 shares under the Employee Stock Purchase Plan (“ESPP”), both pursuant to an “evergreen” provision contained in the respective plans.

On July 29, 2025, the Compensation and Human Capital Committee of the Board of Directors unanimously approved an amendment to the 2018 Plan to reserve an additional 1,500,000 shares of our common stock to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors, as an inducement to the individual’s employment with us within the meaning of Rule 303A.08 of the New York Stock Exchange Listed Company Manual. On August 28, 2025, we registered an aggregate of up to 1,500,000 shares of common stock on a Registration Statement on Form S-8.

The following table sets forth the available shares for grants as of September 28, 2025:

We sponsor the ESPP for eligible employees, under which, employees purchased 155 thousand shares and 233 thousand shares during the nine months ended September 28, 2025 and September 29, 2024, respectively. As of September 28, 2025, 3.3 million shares were available for issuance under the ESPP.

We did not grant options during the nine months ended September 28, 2025. Stock option activity during the nine months ended September 28, 2025 was as follows:

RSU activity, exclusive of PSU activity, during the nine months ended September 28, 2025 was as follows:

Our executive officers and other senior employees have been granted PSUs with some vesting occurring when performance conditions are met and some vesting occurring at the end of a three or five-year period when market conditions are met. The number of units earned and eligible to vest are determined based on the achievement of various performance conditions or market conditions, including annual recurring revenue, cumulative paid accounts, subscriptions and services gross margin, stock price, and the recipients’ continued services. At the end of each reporting period, we evaluate the probability of achieving the performance and record the related stock-based compensation expense based on the estimated achievement over the service period.

PSU activity during the nine months ended September 28, 2025 was as follows:

The following table sets forth the stock-based compensation expense by line item on the unaudited condensed consolidated statements of comprehensive income (loss):

As of September 28, 2025, all outstanding options were fully vested, therefore, there was no unrecognized compensation cost related to stock options. As of September 28, 2025, $57.8 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.2 years.

The provision for income taxes for the three and nine months ended September 28, 2025 was $0.2 million and $0.4 million, respectively, or an effective tax rate of 2.2% and 4.2%, respectively. The provision for income taxes for the three and nine months ended September 29, 2024 was $0.3 million and $1.0 million, respectively, or an effective tax rate of (8.0)% and (3.9)%, respectively. Provision for income taxes decreased for the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to lower international tax on account of expected research and development credits in Ireland and the removal by the One Big Beautiful Bill Act (“OBBBA”) of the mandatory capitalization and amortization requirements for U.S. research and development expenditures previously enacted under the Tax Cuts and Jobs Act (“TCJA”). Although the tax provision declined, the effective tax rate increased compared to the prior year period reflecting the shift from pre-tax loss in the prior year period to pre-tax income in the current year period. The lower effective tax rate for the three and nine months ended September 28, 2025, compared to the U.S. federal income tax rate, is primarily due to the valuation allowance on our net U.S. deferred tax assets and the impact of a lower tax rate on foreign earnings.

We regularly evaluate the realizability of our net deferred tax assets. As of September 28, 2025, all our U.S. deferred tax assets, net of deferred tax liabilities, were subject to a valuation allowance. If our financial results continue to improve, our assessment of the realization of our U.S. net deferred tax assets could result in the release of some or all the valuation allowance. Such a release would result in a material non-cash income tax benefit in our consolidated statements of comprehensive income (loss) in the period of release and the recording of additional deferred tax assets on our consolidated balance sheets. There is a reasonable possibility that within the next several quarters, sufficient positive evidence will become available to reach a conclusion that all or a significant portion of the valuation allowance against our U.S. net deferred tax assets would no longer be required.

We operate as one operating and reportable segment. Our Chief Executive Officer (“CEO”) is identified as the Chief Operating Decision Maker (“CODM”), who reviews financial information presented in a consolidated basis and considers budget-to-actual variances quarterly for allocation of operating and capital resources and evaluation of financial performance. The CODM does not review segment assets at a different asset level and category. The consolidated net income (loss) is the measure of segment net income (loss) that is most consistent with U.S. GAAP.

The CODM is regularly provided with not only the consolidated expenses on our unaudited condensed consolidated statements of comprehensive income (loss), but also the significant segment expenses and other segment items as below:

			Three Months Ended												Nine Months Ended
			September 28, 2025						September 29, 2024						September 28, 2025						September 29, 2024
			(In thousands)
Revenue			$	139,529					$	137,667					$	388,000					$	389,314
Less:
Cost of revenue			83,023						89,251						220,692						246,664
Operating expenses:
Personnel-related expense			18,165						16,857						54,441						52,309
Stock-based compensation			12,525						13,734						42,518						50,541
Outside professional services			12,176						13,613						34,785						42,226
Marketing expenditure			4,680						4,726						14,724						12,847
Credit card and in-app processing fee			4,582						2,135						12,232						6,195
Other segment items (1)			(3,279)						1,051						(2,831)						1,819
Depreciation			534						282						1,609						1,069
Interest expense			96						128						266						327
Provision for income taxes			154						329						402						960
Segment net income (loss)			$	6,873					$	(4,439)					$	9,162					$	(25,643)
Reconciliation of profit or loss:
Adjustments and reconciling items			—						—						—						—
Consolidated net income (loss)			$	6,873					$	(4,439)					$	9,162					$	(25,643)

_________________________

(1)Other segment items include corporate IT and facility overhead, freight out expense, restructuring charges, separation expense, litigation reserves, gain on early lease termination, interest income, foreign currency exchange gain (loss), net and others.

Revenue consists of subscriptions and services revenue and product sales, less allowances for estimated sales returns, price protection, end-user customer rebates, net changes in deferred revenue, and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance. Sales and usage-based taxes are excluded from revenue. For reporting purposes, revenue by geographic area is generally based upon the bill-to location of the customer. The following table presents revenue by geographic area.

Long-lived assets include property and equipment, net and operating lease right-of-use assets, net. Our long-lived assets are based on the physical location of the assets. The following table presents long-lived assets by geographic area.

On September 24, 2024, we announced that our Board of Directors approved a stock repurchase program of up to an aggregate of $50.0 million of shares of Arlo’s common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of Arlo’s common stock. The stock repurchase program is expected to continue through December 31, 2026 unless extended or shortened by the Board of Directors.

The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the nine months ended September 28, 2025, we repurchased and subsequently retired 2.1 million shares of Arlo common stock for an aggregate repurchase amount of $26.8 million. As of September 28, 2025, $18.8 million remained available and authorized for future repurchases.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Arlo is transforming the ways in which people can protect everything that matters to them with advanced home, business, and personal security services that combine a globally scaled cloud platform, advanced monitoring and analytics capabilities, and award-winning app-controlled devices to create a personalized security ecosystem. Arlo’s deep expertise in cloud services, cutting-edge AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that is easy to setup and engage with every day. Our highly secure, cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection – all rooted in a commitment to safeguard privacy for our users and their personal data.

Since the launch of our first product in December 2014, we have shipped over 41.4 million smart connected devices. As of September 28, 2025, the Arlo platform had approximately 11.8 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 5.4 million cumulative paid accounts and annual recurring revenue (“ARR”) of $323.2 million.

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, wireless carrier channels, security solution providers, and Arlo’s direct to consumer store. For the three months ended September 28, 2025 and September 29, 2024, we generated total revenue of $139.5 million and $137.7 million, respectively, and income (loss) from operations was $0.9 million and $(5.5) million, respectively. For the nine months ended September 28, 2025 and September 29, 2024, we generated total revenue of $388.0 million and $389.3 million, respectively, and income (loss) from operations was $1.4 million and $(28.9) million, respectively.

Our goal is to continue to develop innovative, world-class smart security solutions to expand and further monetize our current and future user and paid account bases. We believe that the growth of our business is dependent on many factors, including our ability to innovate and launch successful new products on a timely basis and grow our installed base, to increase subscription-based recurring revenue, to invest in channel and other strategic partnerships and to continue our global expansion.

We expect to increase our investment in research and development going forward as we continue to introduce new and innovative products and services to enhance the Arlo platform and compete for engineering talent. We also expect our sales and marketing expenses to increase in the future as we invest in marketing to drive demand for our products and services.

In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. We believe these key business metrics provide useful information by offering the ability to make more meaningful period-to-period comparisons of our on-going operating results and a better understanding of how management plans and measures our underlying business. Our key business metrics may be calculated in a manner different from the same key business metrics used by other companies. We regularly review our processes for calculating these metrics, and from time to time we may discover a need to make adjustments to better reflect our business. We believe that any such adjustments are immaterial unless otherwise stated.

Cumulative Registered Accounts. Registered accounts at the end of a particular period are defined as the number of unique registered accounts on the Arlo platform. The number of registered accounts on the Arlo platform does not directly correspond to the number of users. A single account may be shared by multiple users (which we consider as one account) and a single user may have multiple accounts (which we consider as multiple accounts).

Cumulative Paid Accounts. Paid accounts at the end of a particular period are defined as any account worldwide where a subscription-based or otherwise reoccurring service fee was collected by Arlo (either directly from a user or from a partner).

Annual Recurring Revenue. We believe ARR enables measurement of our business initiatives and serves as an indicator of our future growth. ARR represents and is defined as the annualized paid subscriptions and services revenue we expect to recognize from subscription contracts, as calculated by taking the average paid subscriptions and services revenue per paid account of the reporting period multiplied by the number of paid accounts at the end of the reporting period. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.

The U.S. government implemented new tariff measures affecting a broad range of imported materials. Certain countries have responded to the U.S. tariffs by imposing or threatening retaliatory tariffs. While we are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment, we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets as a result of the new U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our suppliers ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.

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

Our gross revenue consists primarily of paid subscriptions and services revenue and sales of devices. Our paid subscription services are billed in advance of the start of the monthly subscription and revenue is recognized ratably over the subscription period. We generally recognize revenue from product sales at the time the product is shipped and transfer of control from us to the customer occurs.

Our revenue consists of gross revenue, less customer rebates and other channel sales incentives, allowances for estimated sales returns, price protection, and net changes in deferred revenue. A significant portion of our marketing expenditure is with customers and is deemed to be a reduction of revenue under authoritative guidance for revenue recognition.

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.

Revenue by classification is as follows:

Subscriptions and services revenue increased by $18.1 million or 29.2%, and $48.1 million or 26.9%, for the three and nine months ended September 28, 2025 compared to the prior year periods, respectively, primarily due to a 27.4% increase in cumulative paid accounts and continued increase in average revenue per user (“ARPU”) on retail and direct paid subscription services.

Products revenue decreased by $16.2 million or 21.4%, and $49.4 million or 23.5%, for the three and nine months ended September 28, 2025 compared to the prior year periods, respectively, primarily from the decrease in product sales in EMEA due to the timing of device shipments from our largest customer and the reduction in average selling prices (“ASPs”) of our products as we increased promotional activities to stimulate household acquisition and subscriber growth. The decrease in products revenue was due to the higher sales incentives which are deemed to be reductions of revenue.

Cost of revenue consists of both subscriptions and services cost as well as products cost. Subscriptions and services cost consists of costs attributable to the provision and maintenance of our cloud-based platform, including personnel expense, data storage, security and computing, IT and facilities overhead, and amortization of software development. Products cost primarily consists of the cost of finished products from our third-party manufacturers and overhead costs, including personnel expense for operations staff, purchasing, product planning, inventory control, warehousing and distribution logistics, third-party software licensing fees, inbound freight, duty and tariff costs, IT and facilities overhead, warranty costs associated with returned goods, write-downs for excess and obsolete inventory and excess components, and royalties to third parties.

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.

Subscriptions and services cost of revenue decreased by 13.9% and 13.3% for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily due to cost savings as we optimize our cloud platform to improve customer experience which assists in reduced data storage and cloud costs.

Products cost of revenue decreased by 5.6% and 10.0% for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily due to the decrease in product sales partially offset by an increase in freight cost mainly as a result of increased duties and tariffs, and to a lesser extent, the utilization of air freight.