Alarm.com (NASDAQ:ALRM) raised its 2026 revenue and earnings outlook after reporting third-quarter results that exceeded its expectations, helped by recurring revenue growth and a temporary boost from hardware cost recoveries.
The security technology company also announced its acquisition of gate access provider CellGate and offered a preliminary 2027 outlook that calls for higher revenue and adjusted earnings, though management cautioned that component costs and investment decisions could affect margins.
Third-quarter SaaS and license revenue rose 9% from a year earlier to $191.2 million, approximately $1.3 million above the midpoint of the company’s guidance, Chief Financial Officer Kevin Bradley said. Total revenue increased 9% to $279.4 million, including $88.3 million from hardware and other sources.
Adjusted EBITDA rose 19.3% to $66.2 million, while adjusted net income increased 22.3% to $48.3 million, or $0.90 per diluted share. On a GAAP basis, net income attributable to common stockholders was $34.4 million, or $0.66 per diluted share, compared with $35.3 million, or $0.65 per share, a year earlier. Bradley said the year-over-year non-GAAP comparisons used revised definitions applied to both periods.
The company generated $69.5 million of free cash flow during the quarter and ended the period with $534.7 million in cash. It repurchased approximately 241,000 shares for $13.5 million during the quarter.
Hardware margins face pressure
Hardware gross margin was 28.4%, approximately 650 basis points higher than a year earlier. Bradley said about $3.8 million in temporary tariff-related cost recoveries accounted for most of the year-over-year improvement. He said the benefit also largely explained the expansion in adjusted EBITDA margin, which reached 23.7%.
Management expects hardware gross margin to fall to approximately 20.5% in the fourth quarter as the temporary benefit drops out and higher memory costs take effect ahead of the full impact of pricing changes. Bradley estimated that those hardware factors would create an approximately $6.6 million sequential EBITDA headwind.
For full-year 2026, Alarm.com raised its SaaS and license revenue outlook to $756.1 million to $756.3 million, up $2 million at the midpoint from its prior forecast. It now expects total revenue of $1.1011 billion to $1.1113 billion and adjusted EBITDA of $227 million to $229 million, a $6 million increase at the midpoint.
The company projected adjusted net income of $161.2 million to $162.6 million, or $3.02 to $3.04 per diluted share, for the year.
CellGate acquisition and 2027 outlook
Chief Executive Officer Steve Trundle said CellGate provides cellular-connected gate access and video intercom products and will expand Alarm.com’s reach into the fence and gate contractor market. CellGate will operate as a standalone business, with integrations into parts of Alarm.com’s platform planned over time, he said.
Bradley expects CellGate to contribute $15 million to $20 million in SaaS and license revenue in 2027. He said the acquisition would be dilutive to adjusted EBITDA margins for the next couple of years, with opportunities to improve profitability as recurring revenue grows.
In its preliminary 2027 outlook, Alarm.com projected SaaS and license revenue of $815 million to $820 million, total revenue of approximately $1.175 billion to $1.19 billion and adjusted EBITDA of $240 million to $245 million. The company expects to provide formal guidance when it reports fourth-quarter results.
Bradley said the forecast implies a full-year adjusted EBITDA margin of approximately 20.5% at the midpoint. Reaching the company’s target of exiting 2027 with a margin in the 21% range will depend heavily on hardware margins and decisions about reinvestment, including in CellGate, he said.
Growth initiatives and ADT relationship
Bradley said the company’s growth initiatives are expected to represent about one-third of revenue in 2026 and grow between 25% and 30% for the year. The preliminary 2027 outlook assumes aggregate growth for those initiatives returns to a 20% to 25% range.
He also cited revenue retention in the 95% range and higher revenue per new residential account, supported in part by video adoption. Trundle said international operations are growing faster than the consolidated business but have been slower than the company hoped.
Addressing the announced acquisition of ADT by Thrive Holdings, Trundle said Alarm.com would continue supporting ADT as a large residential and small-business customer. While he sees potential opportunities to collaborate, the company is modeling ADT’s contribution as it did before the deal announcement, and he does not currently expect a fundamental change in the relationship.
About Alarm.com (NASDAQ:ALRM)
Alarm.com Holdings, Inc develops cloud-based technology for connected security and smart automation. Its platform helps residential and commercial customers monitor and manage security systems, video cameras, access control, energy use, and other connected devices through mobile applications and web-based tools.
The company’s products and services are delivered primarily through a network of authorized service providers, including security dealers and integrators. Its offerings include intrusion detection, smart-home automation, video surveillance, commercial security and access management, energy management, and solutions designed for property managers and other business customers.
Founded in 2000 and headquartered in Vienna, Virginia, Alarm.com serves customers through service providers in the United States and international markets.
