Key Highlights

  • The reason to look again is the March 2026 quarter. Revenue rose 11.0% to US$265.2m, a clear reacceleration against the 7.6% managed across all of 2025, and management lifted its full-year outlook on 7 May.
  • In the three months, SaaS and licence revenue, the recurring, high-margin engine, grew 10.8% to US$181.5m, while hardware and other revenue rose to US$83.7m from US$75.0m.
  • The core platform is a genuinely good business: high-retention recurring software revenue delivered through partners who bear the installation cost, an 84.6% software gross margin even after this year's compression, and group free cash flow of US$137.0m in 2025.
  • The 10-K discloses that ADT LLC represented greater than 15% but not more than 20% of revenue in each of 2023, 2024 and 2025.

Why the market is paying attention

Alarm.com (NASDAQ:ALRM). That values the connected-property software group at roughly US$2.68bn, mid-way through a 52-week range of US$41.49 to US$59.53 on aggregated market data data.

The reason to look again is the March 2026 quarter. Revenue rose 11.0% to US$265.2m, a clear reacceleration against the 7.6% managed across all of 2025, and management lifted its full-year outlook on 7 May. Most of the incremental growth came not from the core residential security platform but from the smaller segment housing OpenEye commercial video and EnergyHub grid software, where revenue jumped 56%.

Second-quarter results had not been published as; figures below relate to the March 2026 quarter or the 2025 financial year.

What the company does

Alarm.com sells a cloud platform for what it calls intelligently connected properties: alarm monitoring, video, access control, automation and energy management for homes, apartment blocks and commercial sites. It says the platform processed more than 365 billion data points from over 170 million connected devices during 2025.

It does not sell to householders directly. Distribution runs through a global network of professional service provider partners, alarm dealers and integrators, who fit the equipment and then pay recurring monthly SaaS and licence fees per subscriber account. It also sells them hardware, largely at low margin, to seed those accounts.

Two subsidiaries sit outside the core. OpenEye supplies enterprise commercial video management and surveillance-as-a-service to universities, banks and retail chains. EnergyHub sells software that lets utilities aggregate thermostats, home batteries and electric vehicles into virtual power plants.

Latest financial and operating performance

In the three months, SaaS and licence revenue, the recurring, high-margin engine, grew 10.8% to US$181.5m, while hardware and other revenue rose to US$83.7m from US$75.0m. Operating income improved to US$31.6m from US$29.6m.

Below that line the picture is less flattering. Interest income collapsed to US$4.9m from US$12.4m after the company drained cash to retire debt, so net income attributable to common stockholders fell to US$23.6m, or US$0.47 a diluted share, from US$28.0m and US$0.52. Adjusted EBITDA nonetheless rose to US$49.6m and free cash flow to US$49.7m, from US$17.9m.

Gross margin is the number to watch: SaaS and licence gross margin narrowed to 84.6% from 86.8%, and total gross margin to 65.9% from 67.2%.

Cash ended the quarter at US$497.4m, down from US$960.6m, after repaying US$500m of zero-coupon convertible notes. That leaves US$500m of 2.25% notes due June 2029 against equity of US$859.8m. Alarm.com also repurchased 428,065 shares for US$20.0m under a US$100m authorisation.

For 2025, revenue was US$1,011.2m, up 7.6%, and net income US$131.6m, or US$2.46 a diluted share. Guidance for 2026, raised in May, calls for SaaS and licence revenue of US$749.5m to US$750.5m and adjusted earnings of US$2.81 to US$2.82 a share.

The catalyst: commercial video and the grid

Segment disclosure sharpens the story. In the March quarter the Alarm.com segment produced revenue of US$238.4m and operating income of US$38.4m. The Other segment, OpenEye and EnergyHub, produced US$28.2m of revenue, up from US$18.0m, but an operating loss of US$6.8m, wider than the US$4.7m a year earlier.

The fastest-growing part of the business is being funded by the slowest. That is defensible, but it explains the margin arithmetic: commercial video is hardware-heavy and sold against entrenched incumbents, so each extra dollar of Other-segment revenue currently dilutes group gross margin.

The milestones behind it are real. The commercial business passed two million active video devices during 2025, while EnergyHub had more than 2.5 million distributed energy resources under management and shifted roughly 38,000 MWh of load across more than three thousand grid events during the year.

The bull case

The core platform is a genuinely good business: high-retention recurring software revenue delivered through partners who bear the installation cost, an 84.6% software gross margin even after this year's compression, and group free cash flow of US$137.0m in 2025.

Growth is improving rather than fading, and the May guidance raise suggests the newer categories are starting to move the consolidated needle. The balance sheet is cleaner too: with the 2026 notes repaid and nothing due until 2029, Alarm.com holds close to US$500m of cash, is profitable and is buying back stock.

The bear case and the risks

Customer concentration. The 10-K discloses that ADT LLC represented greater than 15% but not more than 20% of revenue in each of 2023, 2024 and 2025. A partner of that size holds real leverage; any move of accounts onto a rival or in-house platform would be material.

Margin and mix. SaaS and licence gross margin fell 220 basis points year on year and the Other segment's operating loss widened. If commercial video and energy keep outgrowing the core, group gross margin should keep drifting lower until those units reach scale.

Litigation. Alarm.com is defending a patent suit brought by EcoFactor in Oregon in January 2022 over five patents, stayed since April 2022 while patent office proceedings run; three of those patents were found unpatentable on reexamination. SkyBell sued in Virginia in July 2025 alleging misappropriation of video doorbell trade secrets, with discovery closing. The company says it has valid defences and has recorded no loss accrual.

A smaller cash buffer. Repaying US$500m of notes roughly halved cash and cut quarterly interest income by about US$7.5m year on year, which is why earnings per share fell even as operating income rose.

What investors should watch next

Second-quarter results. Not published as; aggregated market data lists an expected date of 6 August. The benchmark is SaaS and licence revenue of US$185.5m to US$185.7m.

Software gross margin. A print below 84.6% would confirm that mix shift, not a one-off, is driving the compression.

The Other segment. Whether growth holds near 56% and whether the US$6.8m quarterly operating loss begins to narrow.

Guidance and buybacks. A further raise to full-year SaaS guidance would signal durable momentum; the pace of repurchases against the US$100m authorisation is the other tell.

Investor takeaway

Alarm.com is a profitable, cash-generative software business that has chosen to spend some of its margin buying growth in commercial video and utility-grid software. The March 2026 quarter showed both sides of that bargain: revenue growth of 11.0%, free cash flow of US$49.7m and a raised outlook, set against software gross margin down to 84.6%, a widening loss in the OpenEye and EnergyHub segment, and lower earnings per share once the loss of interest income is counted.

Whether it works will show up in the numbers rather than the narrative. Sustained Other-segment growth alongside a narrowing segment loss would validate it; continued margin erosion without operating leverage would not. Concentration on one very large partner and unresolved intellectual property litigation remain live variables.

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy, sell, or hold any security. Share prices can rise or fall, and past performance does not guarantee future results. Investors should conduct independent research and consult a licensed financial adviser before making investment decisions.