Summary
Alarm.com's second quarter of fiscal year 2026 showed solid top-line growth but weaker GAAP profitability. Total revenue rose 9.2% year over year to $277.7 million, and year-to-date revenue climbed 10.1% to $542.9 million. Operating income increased 1.4% to $32.5 million in the quarter and 4.0% to $64.1 million for the first half. Operating margin slipped 0.9 percentage points to 11.7% in the quarter and 0.7 percentage points to 11.8% year to date. Net income fell 29.3% to $24.2 million in the quarter and 23.2% to $47.6 million year to date. Diluted EPS was $0.48, down 23.8%, and $0.95 for the first half, down 17.4%.
Expense pressure weighed on profitability. General and administrative expense increased $9.6 million, including a $9.2 million increase in legal costs tied to intellectual property matters. Non-ordinary course litigation expense excluded from non-GAAP results was $9.3 million in the quarter, compared with $87 thousand a year earlier. The effective tax rate was 24.9% for the quarter and 22.6% for the first half, up from 13.8% and 17.1%, as research and development tax credits declined. Interest income fell to $4.491 million from $11.808 million because cash balances dropped after the $500.0 million repayment of the 2026 Notes on January 14, 2026. Cash and cash equivalents were $479.4 million as of June 30, 2026, compared with $960.6 million as of December 31, 2025.
Cash generation was strong. Operating cash flow was $41.9 million in the quarter, up 84.4%, and $92.5 million for the first half, up 97.8%. Capital expenditures were $4.8 million in the quarter, up 6.5%, and $5.8 million for the first half, down 46.0%. Deferred revenue was $31.8 million, up 16.8%. Non-GAAP free cash flow, a separate liquidity measure, was $86.8 million for the first half, compared with $36.1 million a year earlier. The company repurchased 570,000 shares for $25.0 million in the quarter and 998,065 shares for $45.0 million in the first half. On May 4, 2026, the board authorized a new $150.0 million repurchase program running through May 4, 2028. Management expects capital expenditures of $5.0 million to $8.0 million over the final six months of fiscal year 2026.
Alarm.com launched a Fire Communicator to extend its commercial platform into the commercial fire market. EnergyHub dispatched 304 demand response events across 31 states and Ontario over the July Fourth weekend, shifting 17.5 gigawatt-hours of load. CHeKT introduced advanced system partitioning for larger commercial video monitoring deployments. The SaaS and license revenue renewal rate was 95% for the twelve months ended June 30, 2026, compared with 94% a year earlier. For the third quarter of 2026, management guided SaaS and license revenue to $189.8 million to $190.0 million. For the full year 2026, SaaS and license revenue guidance is $754.0 million to $754.4 million, up $10.2 million from the midpoint provided in February 2026. Total revenue guidance is $1.0790 billion to $1.0894 billion. Non-GAAP adjusted EBITDA guidance is $221.0 million to $223.0 million. Non-GAAP adjusted net income attributable to common stockholders is guided to $156.0 million to $157.0 million, or $2.92 to $2.94 per diluted share, based on a 21.0% tax rate and 56.3 million weighted average diluted shares.
Risks remain. The company cited macroeconomic conditions, supply chain disruptions, tariffs, interest rates, recession and inflation as factors that could affect results. Much of its hardware is produced in Vietnam, Thailand and Taiwan, and tariff framework agreements have already affected hardware revenue margins. It filed for an estimated $14.5 million in IEEPA tariff refunds and recorded less than one third of that amount as a reduction to cost of hardware and other revenue, with commensurate refunds to customers. The Other segment is in the investment stage and has incurred significant operating expenses relative to its revenue. Guidance is forward-looking, and actual results may differ materially.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $277.7M | $265.2M | +4.7% | $254.3M | +9.2% |
| Gross profit | $182.1M | $174.7M | +4.2% | $166.8M | +9.1% |
| Gross margin | 65.6% | 65.9% | -0.3 pp | 65.6% | -0.0 pp |
| Research & development | $71.0M | $72.1M | -1.5% | $69.1M | +2.8% |
| Sales & marketing | $33.0M | $34.4M | -4.2% | $31.1M | +5.9% |
| General & administrative | $36.6M | $27.5M | +33.5% | $27.1M | +35.3% |
| Total operating expenses | $149.6M | $143.0M | +4.6% | $134.8M | +11.0% |
| Operating income (loss) | $32.5M | $31.6M | +2.7% | $32.0M | +1.4% |
| Operating margin | 11.7% | 11.9% | -0.2 pp | 12.6% | -0.9 pp |
| Net income (loss) | $24.2M | $23.4M | +3.5% | $34.2M | -29.3% |
| Net margin | 8.7% | 8.8% | -0.1 pp | 13.4% | -4.7 pp |
| Diluted EPS | $0.48 | $0.47 | +$0.01 | $0.63 | -$0.15 |
Risks
The filing states that negative Macroeconomic Conditions, including inflation, tariffs, interest rates and the global housing and mortgage markets, could reduce consumer discretionary spending and new home construction or renovation demand. A weak economy could shrink the available pool of service providers and increase partner bankruptcies, which the company says may harm reputation, revenue and profitability.
A significant portion of hardware is produced outside the United States, including in Vietnam, Thailand and Taiwan, and the company states that announced tariff framework agreements have impacted hardware revenue margins. It filed for an estimated $14.5 million in IEEPA tariff refunds and recorded less than one third of that amount as a reduction to cost of hardware and other revenue during the three and six months ended June 30, 2026.
The company faces the EcoFactor patent infringement suit and the SkyBell trade secrets suit, which SkyBell amended on May 26, 2026 to add copyright infringement allegations. General and administrative expense rose 35% for the three months ended June 30, 2026, primarily on a $9.2 million increase in legal costs related to intellectual property matters, and non-GAAP litigation expense was $9.3 million for the quarter, up from $0.1 million.
The filing states the company receives a substantial portion of its revenue from a limited number of service provider partners and that the loss of, or a significant reduction in orders from, one or more major service provider partners would decrease revenue and profitability. Substantially all revenue is generated through service provider partners who control subscriber acquisition, support and installation.
The company describes highly competitive markets with large technology companies including Google's Nest Labs, Amazon's Ring, Apple HomeKit, SimpliSafe and others, and warns of aggressive business tactics such as selling at a discount or bundling similar products at no charge. Increased competition could result in price reductions and loss of market share.
Management states it does not expect to achieve similar growth rates in future periods even as total revenue rose 10.1% to $542.9 million for the six months ended June 30, 2026 and 9.2% to $277.7 million for the quarter. Managing continued expansion, acquisitions and a geographically dispersed workforce is described as placing significant strain on managerial and operational resources.
The company notes risk of an increased percentage of service provider partners filing for bankruptcy during weak economic times and that collectibility of receivables from service provider partners could be impaired. General and administrative expense in the Other segment increased by $1.9 million in the quarter primarily due to an increase in the provision for credit losses.
Cash and cash equivalents fell to $479.4 million as of June 30, 2026 from $960.6 million at December 31, 2025, largely reflecting the $500.0 million payment of the 2026 Notes on January 14, 2026. The company also cites risks that it may lack funds to settle cash conversions or repurchases of the 2029 Notes upon a fundamental change, and interest income decreased 62% in both the quarter and year to date on lower cash balances and lower average rates.
The business operates in a regulated industry subject to FTC and FCC rules, state licensing and privacy laws, and products requiring government certification before sale. The company notes that the U.S. government shutdown in part of the fourth quarter of 2025 limited the FCC's ability to approve new products, delaying launches, and that past TCPA settlement costs create ongoing exposure tied to service provider conduct.
SaaS KPIs
All quarters →SaaS and license revenue
Non-GAAP free cash flow
Non-GAAP adjusted EBITDA
SaaS and License Revenue Renewal Rate
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.