What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 96 added, 130 removed, 168 unchanged (57% of the section changed)

16 unchanged sentences

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.

Since the launch of our first product in December 2014, we have shipped over 44.1 million smart security devices.

As of March 29, 2026, the Arlo platform had approximately 13.1 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 6.0 million cumulative paid accounts and annual recurring revenue (“ARR”) of $356.9 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.

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 March 29, 2026 and March 30, 2025, we generated total revenue of $150.4 million and $119.1 million, respectively, and income (loss) from operations was $7.6 million and $(1.5) 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.

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.

Key Business Metrics

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.

In addition to the measures presented in our 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.

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We believe that any such adjustments are immaterial unless otherwise stated.

September 28,

2025 % Change September 29,

2026 % Change March 30,

(In thousands, except percentage data)

4 unchanged sentences

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.

Registered accounts at the end of a particular period are defined as the number of unique registered accounts on our platforms.

The number of registered accounts 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).

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

Annual Recurring Revenue .

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Impact of Global Geopolitical, Economic and Business Conditions

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.

government has implemented tariff measures affecting a broad range of imported materials, and these measures have been subject to change.

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.

However, given the uncertainty surrounding global markets as a result of the fluid U.S.

tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face.

We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.

The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S.

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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:

Three Months Ended Nine Months Ended

September 28,

2025 September 29,

2024 September 28,

2025 September 29,

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:

Three Months Ended

2026 March 30,

(In thousands, except percentage data)

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Income (loss) from operations 7,558 5.0 % (1,451) (1.2) %

Gain on early lease termination 4,144 3.0 % — — % 4,144 1.1 % — — %

Other income, net:

Gain on sale of long-term investment 6,423 4.4 % — — %

Interest income, net 1,241 0.8 % 1,316 1.1 %

Other non-operating income (expense), net 503 0.4 % (57) — % (102) — % (100) — %

Other income (expense), net 70 — % (198) (0.2) %

Total other income, net 7,734 5.2 % 1,118 0.9 %

Income (loss) before income taxes 15,292 10.2 % (333) (0.3) %

2 unchanged sentences

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.

Our paid subscription services are billed in advance of the start of the annual or 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.

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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.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

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Revenue by classification is as follows:

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

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Total revenue $ 150,382 26.3 % $ 119,066

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.

Subscriptions and services revenue increased by $21.3 million or 30.9%, for the three months ended March 29, 2026 compared to the prior year period, primarily due to a 22.6% increase in cumulative paid accounts and continued increase in average revenue per user (“ARPU”) on retail and direct paid subscription services driven by higher volume of annual plan renewals.

Products revenue increased by $10.1 million or 20.0%, for the three months ended March 29, 2026 compared to the prior year period, primarily due to the increase in product shipments to our largest customer in EMEA due to stronger customer demand coupled with lower sales incentives and sales returns on retail that are both deemed to be reductions of revenue.

The increase was partially offset by a reduction in average selling prices (“ASPs”) of our products in retail channels as we continue promotional activities to stimulate household acquisition and subscriber growth.

Cost of Revenue

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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.

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.

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manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

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Total cost of revenue $ 77,714 17.1 % $ 66,339

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.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Subscriptions and services cost of revenue increased by 19.7% for the three months ended March 29, 2026, compared to the prior year period, primarily due to subscriptions and services revenue growth, partially offset by cost savings as we optimize our cloud platform to improve customer experience which assists in reduced data storage and cloud compute costs.

Products cost of revenue increased by 16.6% for the three months ended March 29, 2026, compared to the prior year period, primarily due to the increase in product shipments, partially offset by decreases in product warranty and inventory reserves, as well as the decrease in freight-in costs as a result of the utilization of ocean freight.

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

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**Percentage change not meaningful.

Subscriptions and services gross profit increased by $20.1 million and $53.8 million for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily due to subscriptions and services revenue growth as a result of increases in cumulative paid accounts, continued increase in ARPU on retail subscriptions, and cost optimizations.

Products gross profit decreased by $12.0 million and $29.1 million for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily driven by a reduction in the ASPs of our products as we increased promotional activities to stimulate household acquisition and subscriber growth and an increase in freight cost mainly as a result of increased duties and tariffs, and to a lesser extent, the utilization of air freight.

Subscriptions and services gross profit increased by $18.8 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to subscriptions and services revenue growth as a result of increases in cumulative paid accounts, continued increase in ARPU on retail subscriptions, and cost optimizations.

Products gross profit improved by $1.1 million for the three months ended March 29, 2026, compared to the prior year period, primarily driven by lower product warranty and inventory reserves, as well as the decrease in freight-in costs due to the utilization of ocean freight.

The improvement was partially offset by a reduction in the ASPs of our products in retail channel as we continue promotional activities to stimulate household acquisition and subscriber growth.

Operating Expenses

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We believe that innovation and technological leadership are critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services, including our hardware devices, cloud-based software, AI-based algorithms, and machine learning capabilities.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

Research and development expense $ 22,814 41.1 % $ 16,165

Research and development expense slightly increased by $0.6 million for the three months ended September 28, 2025 compared to the prior year period, primarily due to an increase of $2.1 million in personnel-related expenses due to the headcount increases as a result of our research and development investment, partially offset by a decrease of $1.3 million in professional services due to the capitalization of software development costs as we invest in software capabilities.

Research and development expense decreased by $5.1 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to decreases of $5.0 million in professional services, $2.9 million in IT and facilities overhead related to allocation associated with corporate infrastructure, and $1.1 million in personnel-related expenses due to the capitalization of software development costs as we invest in software capabilities, partially offset by an increase of $3.8 million in personnel-related expenses due to the headcount increases as a result of our research and development investment.

Research and development expense increased by $6.6 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to increases of $3.3 million in stock-based compensation as a result of the increase in our stock price;

$2.5 million in payroll-related compensation as a result of headcount increases;

and $0.5 million in outside professional services as we continued our investment in platform services.

Sales and Marketing

Sales and marketing expense consists primarily of personnel expense for sales and marketing staff, technical support expense, advertising, trade shows, media and placement, corporate communications and other marketing expense, product marketing expense, allocated IT and facilities overhead, outbound freight costs, and credit card processing fees.

We expect our sales and marketing expense to increase in the future as we invest in marketing to drive demand for our subscriptions and services and device products.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

We expect our sales and marketing expense to increase in the future as we invest in marketing to drive demand for our subscriptions and services and devices.

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

Sales and marketing expense $ 22,654 12.1 % $ 20,203

Sales and marketing expense increased by $2.6 million for the three months ended September 28, 2025 compared to the prior year period, primarily due to increases of $2.4 million in credit card and in-app processing fees as a result of increases in paid accounts and focused efforts to improve our customer’s app experience.

Sales and marketing expense increased by $8.9 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to increases of $6.5 million in credit card and in-app processing fees as a result of increases in paid accounts and focused efforts to improve our customer’s app experience, $1.4 million in marketing expenditures, and $1.0 million in personnel-related expenses mainly from stock-based compensation as a result of the increase in our stock price.

Sales and marketing expense increased by $2.5 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to increases of $1.2 million in credit card and in-app processing fees as a result of the increase in paid accounts and focused efforts to improve our customer’s app experience;

$0.9 million in marketing expenditures;

and $0.2 million in professional services as we continued our investment in our customer experience improvement.

General and Administrative

General and administrative expense consists primarily of personnel-related expense for certain executives, finance and accounting, investor relations, human resources, legal, information technology, professional fees, allocated IT and facilities overhead, strategic initiative expense, and other general corporate expense.

We expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

General and administrative expense $ 18,207 2.4 % $ 17,785

General and administrative expense decreased by $2.0 million and $8.6 million for the three and nine months ended September 28, 2025, respectively compared to the prior year periods, primarily due to (i) the decrease of $1.6 million and $7.9 million, respectively, in personnel-related expenses mainly from stock-based compensation as a result of the achievement of certain performance-based equity award targets in the prior year periods;

and (ii) the decrease of $0.3 million and $0.9 million, respectively, in IT and facilities overhead related to allocation associated with corporate infrastructure.

General and administrative expense increased by $0.4 million for the three months ended March 29, 2026, compared to the prior year period, primarily due to an increase of $2.0 million in legal professional services.

The increase was partially offset by decreases of $0.8 million in payroll-related compensation as a result of headcount decreases and $0.6 million in IT and facilities overhead related to allocation associated with corporate infrastructure.

Other operating expenses

Other operating expenses include restructuring charges, which consist primarily of severance costs, and separation expenses, which consist primarily of costs of legal and professional services.

Other Income (Expense)

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Other operating expenses primarily include acquisition-related expense and workforce reduction costs.

Other Income, Net

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

Gain on early lease termination

$ 4,144 ** $ — 4,144 ** —

Gain on sale of long-term investment $ 6,423 ** $ —

Interest income, net $ 1,241 (5.7) % $ 1,316

$ 1,508 7.7 % $ 1,400 4,168 (2.6) % 4,281

Other non-operating income (expense), net $ 503 ** $ (57) (102) ** (100)

Other income (expense), net $ 70 ** $ (198)

** Percentage change not meaningful.

In July 2025, we entered into a termination agreement for our office lease located in San Jose, California.

We recorded the derecognition of right-of-use assets and lease liabilities and recognized a gain of $4.1 million upon the termination effective in the third quarter of 2025.

Interest income, net increased for the three months ended September 28, 2025 compared to the prior year period, primarily due to the increase in our short-term investments balance.

Interest income, net decreased for the nine months ended September 28, 2025 compared to the prior year period, primarily due to the declines in interest rates.

During the three months ended March 29, 2026, we sold our strategic long-term investment.

Upon completion of the sale, we received total cash proceeds of $18.9 million and recognized a realized gain of $6.4 million, representing the excess of proceeds received over the carrying value of the investment.

Interest income, net slightly decreased for the three months ended March 29, 2026 compared to the prior year period, primarily due to the declines in interest rates.

Provision for Income Taxes

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

Three Months Ended

2026 % Change March 30,

(In thousands, except percentage data)

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Effective tax rate 2.7 % (150.8) %

The effective tax rate for the three and nine months ended September 28, 2025 was lower than the U.S.

federal income tax rate due to a lower effective tax rate on foreign earnings and valuation allowance on our net U.S.

deferred tax assets and certain foreign tax attributes.

Based on a review of all available evidence, we have concluded that it is more likely than not that we will not be able to realize the benefit of the deferred tax assets in the foreseeable future.

As a result, we are maintaining the full valuation allowance.

However, as we continue to generate income, we are approaching the point at which the accumulated rolling 36-month pre-tax income turns positive—a key piece of objectively verifiable evidence supporting the realizability of deferred tax assets.

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.

Provision for income taxes decreased for the three months ended March 29, 2026, compared to the prior year period, primarily due to the elimination of the mandatory capitalization of research and development expenses, resulting in higher current deductions, lower taxable income and a reduced income tax provision.

The higher effective tax rate for the three months ended March 29, 2026, compared to the U.S.

federal income tax rate, is primarily driven by the shift from a relatively small pre-tax loss in the prior year period to a larger pre-tax profit in the current period.

Although we have recently generated cumulative pre-tax income, we determined that we have not yet demonstrated a sustained level of profitability sufficient to support realization of the deferred tax assets.

We also considered forecasted future taxable income;

however, such projections are inherently uncertain and do not outweigh the available negative evidence.

Based on the totality of evidence, we concluded that it is not more-likely-than-not that the deferred tax assets will be realized.

Accordingly, a full valuation allowance has been maintained as of March 29, 2026.

There is a reasonable possibility that within the next few 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.

On July 4, 2025, the OBBBA, a significant tax reform package, was enacted.

Included in this legislation are provisions that allow for the immediate expensing of domestic U.S.

research and development expenses, and certain capital expenditures, as well as other changes to the U.S.

taxation of profits derived from foreign operations.

Management is continuing to evaluate the provisions of the OBBBA, including treatment of previously capitalized domestic U.S.

research and development expenses.

Based on information available to date, management does not expect the enactment of the OBBBA to have a material impact on our consolidated financial statements;

however, the ultimate effect may differ from the amounts reflected in the interim financial statements once the analysis is complete and elections are finalized.

Liquidity and Capital Resources

As of September 28, 2025, our cash and cash equivalents and short-term investments totaled $165.5 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement.

As of March 29, 2026, our cash and cash equivalents and short-term investments totaled $167.5 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.

We have a history of losses and may incur operating and net losses in the future.

As of September 28, 2025, our accumulated deficit was $388.8 million.

As of March 29, 2026, our accumulated deficit was $368.2 million.

Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.

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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).

Refer to Note 8.

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Stock repurchase program

Our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in September 2024 and is expected to continue through December 31, 2026 unless extended or shortened by the Board of Directors.

During the nine months ended September 28, 2025, we repurchased and subsequently retired 2.1 million shares of Arlo common stock for an aggregate amount of $26.8 million.

As of September 28, 2025, $18.8 million remained available and authorized for future repurchases.

Nine Months Ended

September 28,

2025 September 29,

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 three months ended March 29, 2026, we repurchased and subsequently retired 0.6 million shares of Arlo common stock for an aggregate repurchase of $8.0 million.

As of March 29, 2026, $42.0 million remained available and authorized for future repurchases.

The following table presents our cash flows for the periods presented.

Three Months Ended

2026 March 30,

(In thousands)

1 unchanged sentence

$ 27,863 $ 30,919

Net cash provided by (used in) investing activities (30,428) 11,229

Net cash used in investing activities

(14,333) (14,352)

Net cash used in financing activities (7,334) (14,590)

1 unchanged sentence

Operating activities

Net cash provided by operating activities increased by $14.3 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to improved profitability, partially offset by unfavorable working capital movements as a result of (i) higher accounts receivable balances in connection with our subscription sales growth;

and (ii) decreased accounts payable balances mainly due to timing of payments;

partially offset by (i) higher inventory balances as we prepare for the holiday season and (ii) increases in deferred revenue due to the growth in our paid accounts and subscription rates.

Net cash provided by operating activities decreased by $3.1 million for the three months ended March 29, 2026 compared to the prior year period, primarily due to unfavorable working capital movements of (i) higher accounts receivable balance primarily due to strong product sales;

(ii) higher inventory purchases;

and (iii) increases in deferred revenue due to the growth in our paid accounts and subscription rates;

partially offset by the increase in accounts payable balances mainly due to timing of payments;

partially offset by improved profitability.

Investing activities

Net cash used in investing activities increased by $41.7 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to higher net purchases of short-term investments, coupled with our strategic long-term investment in a privately-held company, as well as to a lesser extent, the increases in capitalized software development costs.

Net cash used in investing activities was flat for the three months ended March 29, 2026 compared to the prior year period, primarily due to the payment for business combination offset by proceeds from the sale of our strategic investment and higher net proceeds from our available-for-sale securities investment.

Financing activities

Net cash used in financing activities decreased by $11.3 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to the decrease in withholding tax from RSU and PSU releases as a result of the sell-to-cover method being applied to all Arlo employees for their tax withholding effective on January 1, 2025, partially offset by the stock repurchases.

Net cash used in financing activities decreased by $7.3 million for the three months ended March 29, 2026 compared to the prior year period, primarily due to lower stock repurchases offset by lower proceeds from employee stock plans.

Critical Accounting Policies and Estimates

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 28, 2025, other than as discussed in Note 2.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 29, 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.

Quantitative and Qualitative Disclosures About Market Risk

During the nine months ended September 28, 2025, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2024.

During the three months ended March 29, 2026, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis